Cape Town and Johannesburg’s commercial property has outshone that of cities such as New York and London over the past 10 years, according to Investment Property Databank’s (IPD’s) Global Cities Report released in London this week.
“Commercial property is a key measure of economic vitality, since strong retail, leisure and industrial performance encourages investors such as pension funds to buy up buildings to earn income through rental income and capital value increases,” the London-based research and information company said in a statement.
“Over a 10-year period, Johannesburg and Cape Town saw the strongest growth in property values around the world,” IPD said.
Capital value appreciation in Cape Town has hit 9.7% over 10 years to 2011 and Johannesburg’s has hit 7.5%, compared to 3.6% percent for New York, 2.2% percent for London and -0.1% for Munich, the Global Cities Report showed.
The report compares real estate performance in 60 cities in 24 countries. It also examines the impact of tourism, gross domestic product, exchange rates and national debt on property performance.
Johannesburg and Cape Town outperformed major global cities due to growing investor appetite and the fact that its property was sheltered from the global financial crisis, the report found.
“The picture for global real estate is a tale of havens and have-nots,” said IPD senior director for group business development Peter Hobbs.
“Institutions want safety, and at the minute, that means low-yielding prime office or retail in safe haven pockets around the world.”
The two South African cities serve as havens as both Johannesburg and Cape Town boast a strong fundamental demand for real estate. “Properties with good leases held by strong tenants tend to be attractive to institutions sheltering from the volatility of global markets,” Hobbs said.
According to South Africa Info, “Only a select few cities around the world have values above their pre-recession peaks – among them Johannesburg, Cape Town, Zurich, Munich, Toronto and Seoul, while Dublin has remained bottom of the list for three consecutive years.”
IPD extended its work to South Africa in 1997, when its first local property index was published. At the end of 2011, the total value of the IPD SA Databank included over 2 000 investments with a total value of R205-billion.