Botswana’s Annual property index shows that total return in investments in 2014 reached 11.5 percent, a decrease from the 21.5 percent registered in previous year.
Investment Property Databank (IPD) Botswana Annual Property Consultative Index released this week by a leading provider of research-based indexes, MSCI, shows that the local investment property sector delivered an ungeared total return of just 11.5 percent.
Stan Gurran, Head of real estate at MSCI, said on Tuesday when presenting the latest statistics on the local property sector that figures show that the falls in total return are being seen across the board, with all of the main sectors experiencing a similar drop.
The report states that while total return was underpinned by a relatively stable income return of 9.4 percent, capital growth slowed to 2.0 percent from 10.2 in the previous year.
The top performing sector in 2014 was industrial property, which delivered a total return of 16.8 percent supported by capital growth of 5.9 percent and return of 10.3 percent.
The retail sector delivered a total return of 10.8 percent, with a 9.1 percent income return and a capital return of 1.6 percent. Similarly, the office sector also registered a total return of 10.8 percent in the backdrop of 11.2 percent income return and a negative 0.3 percent capital return.
The office property was the only sector to record a negative capital growth in largely which is said to be largely as a result of vacancy rates increasing 300 basis points to 7.7 percent and rental growth declining to 1.7 percent from 6.2 percent in 2013.
It is reported that though industrial rental growth slowed to 3.3 percent, a zero vacancy rate was recorded for the fourth successive year which reflects robust fundamentals underpinning the sector.
Gurran said despite a fall in in total returns across the board, it seems the factors that support the property sector - low vacancy rates and rental yield - remain strong.
“Landlords are seeing a rise in passing rents, particularly within the retail and residential sectors, which is in line with inflation. Capital value growth declined in all property sectors though still positive at 2.0 percent on aggregate,” Gurran said, adding that the slower growth reverses the bullish view of the year before which could perhaps be a reflection of a cautious attitude among valuers after a run of strong returns for three years ending December 2013. Gurran said data for 2014 shows that the market is normalising.