South Africa has undergone significant political, social, and economic change in the last ten years, as it has emerged from the apartheid era. This article presents an overview and analysis of the South African real estate market over the 1980-99 period, including overall performance analysis, an assessment of the portfolio diversification benefits of real estate, and performance analysis in the post-apartheid period of 1994-99. The future outlook for the South African economy and real estate market is also critically assessed.
South Africa has undergone significant political, social, and economic change in the last ten years. Following forty-five years of apartheid, 1994 saw the introduction of multi-racial democratic rule, with Nelson Mandela elected as president. The resulting Government of National Unity introduced an agenda of reconciliation, national integration, and economic reform, with this restructuring process implemented through economic development strategies including the Reconstruction and Development Program (1994), the Growth, Employment and Redistribution Program (1996) and the Restitution of Land Rights Act (1994).
Following the introduction of this political reform process, various measures were implemented to facilitate South Africa into the international community. These measures included the lifting of international sanctions (1991), normalization of relations with major international financial institutions (1993), establishing a unitary currency system (1995) and the relaxation of foreign exchange controls to encourage overseas investment (1998).
While the direct and indirect real estate aspects of emerging markets (e.g., Chile, Poland, Russia, China, Thailand, Europe, Asia) have received increasing attention in recent years (Barry, Rodriquez and Lipscomb, 1996; Alvayay and Schwartz, 1997; Sharkawy and Chotipanich, 1998; Belniak and Chan, 1999; Kaganova, 1999; Lu and Mei, 1999; Schwartz, 2000; McGreal, Parsa and Keivani, 2001; and Zhang, 2001), the significant transformation in South Africa since 1991 has only seen a small amount of South African real estate-related research appearing in the international journals. This has largely focused on the issues of South African real estate tax (Van Der Walt, 1991; Van Zyl and Vink, 1996; and Franzsen, 1999), and land rights (Harrison, 1992; Terblanche, 1996; and Wilson, Du Plessis and Pienaar, 2000), with Wilson et al. giving full details regarding the historic aspects of the political reform process in South Africa.
With the South African real estate market being large in global emerging market terms, it has the potential to be a key investment target in the future. The purpose of this research is to present an overview and analysis of the South African real estate market over the 1980-99 period, as well as the performance analysis of the other major asset classes in South Africa. Differences in post-1994 real estate performance are highlighted and the future outlook for the South African economy and real estate market is also critically assessed.
General Profile of South Africa
South Africa is one of the major countries on the African continent. With Pretoria as the administrative capital, other South African cities of international stature are Johannesburg and Cape Town. The government has functioned as a democratic republic since 1994; initially with Nelson Mandela as president, and more recently with Tambo Mbeki as president.
Of the total population of over 43 million, 76% are African, 13% of European origins and 11% Mixed/Asian. Along with English and Afrikaans, there are nine other local dialects as the official languages of South Africa. Literacy levels currently stand at 82%. Exhibit I presents a fuller social profile of South Africa as of December 1999. Improving the health and education status in South Africa remains a high priority. …