The South African property sector was worth an estimated R5.8 trillion in 2014/15, according to a recent research report commissioned by the Property Sector Charter Council.

The research, conducted by MSCI, provides a snapshot of the property sector, using baseline research which estimated the value of the property sector at the end of 2010 at R4.9 trillion.

According to the report, the formal residential sector (properties registered at the Deeds Office) is still the largest sector of the national property market. South Africa’s 6.1 million residential properties were valued at R3.9 trillion in 2014/15, accounting for over two thirds of all property owned in South Africa. The value of residential property has increased by 30% in the five years since the end of 2010.

According to the report, the bulk of the value of the formal residential market is in freehold properties (R2.64bn), while the rapidly increasing number of homes in estates and sectional title complexes currently account for a further R620bn each. Only 9% of the total value of the housing market comprises homes defined as “super luxury” – homes valued at more than R3 million.

The research report included informal residential property (properties not formally registered) for the first time. While informal property has no registered value, the size of the sector was quantified using the number of households provide by the Department of Human Settlements.

The second largest property sector is commercial properties, with a value of R1.3 trillion, up from R780 billion in 2010. The majority of the increase in value was the result of capital appreciation, although new developments and refurbishments also resulted in a significant increase in the gross lettable area.

Within the commercial sector, shopping malls have the highest value (R534bn), followed by office buildings (R357bn), industrial properties (R281bn) and hotels and other properties (R94bn).

Several new shopping malls have opened in South Africa in recent years.  With 2 000 shopping centres covering 23 million square metres, South Africa’s retail market is widely viewed as being over-traded. SA has the sixth largest number of shopping malls in the world.

The value of the retail sector may increase, as recently completed shopping malls – and those still under construction – are not yet included in this estimate.

According to the research note, 44.5% of the gross lettable retail space is located in Gauteng, while just 15.3% is located in the Western Cape.

The value of undeveloped urban land zoned for development remained unchanged at around R520 billion (1.1% of total land in SA) in 2014/15. The public sector accounts for a total of R237bn, largely held by the Department of Public Works, state-owned enterprises and metros and selected local municipalities.

Through this research, the Property Sector Charter Council aims to provide an updated estimate of the property sector and create a more accurate overview of the South African economy. The Council believes that – given the sheer size of the sector and its contribution to the economy - it is important to have an understanding of the entire property market.

While the latest research report does not given an indication of the contribution of the property sector to the country’s gross domestic product (GDP), a previous research report estimates the property sector’s contribution to GDP at a significant R191.4bn in 2012 in terms of annual income and expenditure flows generated by the sector.

Prepared by Sandra Gordon | Research and Market Analyst at Pam Golding Properties