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SOUTH AFRICAN PROPERTY
The South African property market has regularly been in the headlines over recent years, with the spectacular prices caused by the recovery of the rand giving investors and second home owners a very tidy profit from their investments.
South Africa looks set to be the best performing country in the IPD universe again in 2005 with a record all property return of 30.1%, double the average return of the five other countries that have already reported this year. South Africa beat both the UK (19.1%), Canada (18.7%) as well as Sweden (12.7%) and Holland (10.2%). At a time when investors are increasingly looking across national borders to generate superior returns, South Africa is becoming increasing popular with property investors.
However, there is more behind the South African property market than property investment. Not many countries in the world offer such great value along side the natural wonders of the Western Cape, the Krueger National Park and the wine country of the Garden Route. The perfectly opposite seasons and minimal time difference make South Africa a popular tourist, second home and retirement destination for the British in particular.
South Africa is enjoying a period of great political stability and economic growth. Strong commodity prices and rising business and consumer confidence are buoying Africa's largest economy, now in its longest period of expansion in four decades. South Africa's gross domestic product growth rate for 2005 was reported at 5%, above the 4.3% forecast a year ago, while inflation has declined to 3.4% from a five-year average of 5.1%. In July 2005 Standard and Poorís re-rated South Africaís local currency A+. Thatís one notch higher than the Czech Republic - an in-vogue destination for international institutional property investors.
In terms of geography, retail in and around Cape Town outperformed all the other major markets, returning investors 40.7%, up from 36.5% in 2004. Offices in and around Kwa-Zulu Natal saw the most impressive growth with returns rising to 29.6% from 10.5% over the 12-month period while industrials in and around Gauteng returned 33.8% compared with 22.8% the previous year.
Cape Town has long been popular with foreign visitors and prices for property close to its upmarket beaches already reflect this popularity. The 2000 mile coastline is picturesque with many golf courses - a sport becoming increasing popular. These coastal areas are the most popular with many purpose built investment developments already in place or in the pipe-line. The Western Cape is the most popular area due to the scenery, but prices here are much higher than on the Eastern Cape.
The political situation remains stable and indications suggest that this should continue. The real estate market is also seen by many in government as being at the core of the country's ongoing development and foreign investment should continue to be encouraged.
Despite recent price rises, the fundamentals still look good for the South African market. The nation's natural beauty and the quality of new developments mean that property remains excellent value compared to much of Europe and North America. Some concerns remain over the political situation in neighbouring Zimbabwe, but on the whole South Africa remains well worth considering as an investment opportunity.