Absa sponsored the development and launch of MSCIs inaugural South African residential property results, which is based on a sample portfolio of residential property worth more than R17bn.
Residential property is growing in popularity as institutional investors want to buy into funds that have exposure to the sector. They say South African demand for affordable housing is staggering and that this will fuel returns that can compete with those derived from other property types.
“The South African residential sectors total return in 2017 was 12.3%. This comprised 3% capital value growth and 9% income return, which matches the total return of the industrial and retail sectors and outstripped the 10.3% of offices for the year. Furthermore, net operating income yields of 8.2% were significantly higher than the other markets measured by MSCI,” said MSCI executive director Phil Barttram.
“These results report on the total returns from professionally managed investments in residential property. As much as 90% of residential property owned by commercial groups is in the affordable housing sector, according to our sample,” Barttram said.
MSCI provides real-estate tools and data to institutional investors, real-estate owners, managers, brokers and occupiers worldwide.
Previously MSCI had only provided data on the industrial, office and retail property sectors. However, over the past three years, commercial property owners have invested in residential property on a large enough scale for MSCI to gather significant data on this sector.
The results were derived from data that was sourced and processed by MSCI based on its individual agreements with contributors. As many as 12 contributors submitted data for portfolios that amounted to an aggregate value of R17.8bn as at December 2017