A study released this week has revealed that the South African property sector is worth an astonishing 5.8 trillion rand.
The study, which was compiled for the Property Sector Charter Council, provides a snapshot of the South African property sector by using 2014/2015 financial year figures from various sources including Lightstone, SAPOA and government departments.
Property sector's value increases by R1 trillion
The study tracks changes in the property sector since the inaugural report which was published at the end of 2010. The 2010 report measured the size of the market at R4.9 trillion, which suggests that the market has grown by almost R1 trillion in 4 years.
Residential property still rules the roost
South Africans are a house proud nation and most of us still aspire to own homes. This has resulted in the residential property sector showing healthy growth. The study shows that the bulk of the property sector in the country is still made up of formal residential property (properties that are registered at the deeds office). Residential property makes up around two thirds of the value of property owned and has grown from an estimated R3 trillion in 2010 to R3.9 trillion.
The study, for the first time, also measured informal residential property. Although this sector has no monetary value, the number of households as reported by the Department of Human Settlements was quantified.
The commercial property picture
The value of the commercial property sector is up from around R780 billion to approximately R1.3 trillion.
The bulk of this, almost R790 billion, is held by corporates followed by Real Estate Investment Trusts(REITS) with R300 billion, unlisted funds with R130 billion, and life and pension funds with R50 billion.
South African’s love affair with shopping centres has entrenched retail property as the top performer in the commercial sector with a value of R534 billion, up from R340 billion in 2012. The retail sector’s value may increase further since this study does not take into account recently completed shopping centres like the Mall of Africa.
Office properties at R357 billion (up from R228 billion) and industrial properties at R281 billion (up from R187 billion) have also shown significant growth in value over the past few years.
Hotels and other property accounted have also increased from R25 billion to R94 billion.
Undeveloped land – an opportunity to add value
Around R520 billion rand worth of undeveloped urban land, which is zoned for commercial or residential development, is available in the country. Representing 1.1% of the total land in South Africa, this has the potential to add a huge amount of value to the property sector if developed and utilised effectively.
R237 billion of this undeveloped land is currently in the hands of the public sector, with R102 billion held by the Department of Public Works, R66 billion held by state owned enterprises like Eskom and Transnet, and R69 billion held by metros and municipalities.
The remaining R283 billion belongs to the private sector.
How much does the property sector contribute to GDP?
A complementary report by the Property Sector Charter Council estimated that the property sector contributed R191.4 billion in annual income and expenditure flows to the GDP in 2012, with a further R46.5 billion contribution to the fiscus.
CEO of the Property Sector Charter Council, Portia Tau-Sekati says: “For a sector this big and this important it is crucial to have a hub of knowledge that consolidates information to support a common and consistent understanding of the sector.”
Tau-Sekati explains that by regularly updating this research the council also creates a measure of the effect of property cycles on the sector’s value, which can be significant.
The research is part of a larger project by the council, which provides a point of departure against which various transformation charter imperatives can be assessed.
Through this research, the Property Sector Charter Council continues to provide an updated scope of the property sector and create a more accurate overview of the South African economy.