Notes to the Consolidated And Separate Annual Financial Statements | Note 6

6. INVESTMENT PROPERTY
6.1 Balances at year end and movements for the year
 
   Group  Company 
RECONCILIATION FOR THE YEAR  2024 
R’000 		 2023 
R’000 		 2024 
R’000 		 2023 
R’000 
Balance at the beginning of the year at fair value  10 731  7 631  –  – 
Reclassification of investment property from property and equipment*  –  4 850  –  – 
Fair value adjustment  1 769  (1 750) –  – 
BALANCE AT THE END OF THE YEAR AT FAIR VALUE   12 500  10 731  –  – 
* This relates to reclassification of investment property from property and equipment due to the fact that the property is leased to an unrelated third party.

Changes in fair values are recognised as gains in profit or loss and included in ‘fair value gains’. All gains are unrealised.

Amounts recognised in profit or loss

  2024 
R’000 		 2023 
R’000 
Rental income 550  669 
Operating expenses (161) (90)

Fair value measurements

Investment property consists of land situated at portion 108 (a portion of portion 27) of the farm Weltevreden 202 Roodepoort, South Africa and Portion 1 Erf 4172 Garsfontein, Registered Division JR City of Tshwane, Gauteng. Both properties are held for capital appreciation and are not occupied by the Group.

The valuation for portion 108 (a portion of portion 27) of the farm Weltevreden 202 Roodepoort was prepared by an independent valuer, J van der Hoven in July 2024, a property practitioner from De Hoven Proprietary Limited. J van der Hoven obtained his Post-Graduate Master’s Degree in Architecture (recognised by Royal Institute of British Architects (RIBA) and Architects Registration Board (ARB) and has more than 10 years’ experience as a property practitioner.

The valuation of Portion 1 Erf 4172 Garsfontein, Registered Division JR City of Tshwane, Gauteng is prepared every three years.

The last valuation was prepared in June 2023 by Ashton Eckler and Tebogo Digoamaje who are both independent valuers from DPP Valuation & Advisory Services Proprietary Limited.

The fair value of portion 108 (a portion of portion 27) of the farm Weltevreden was determined based on comparable sales method.

The fair value of Portion 1 Erf 4172 Garsfontein, was determined using the Income Approach method of valuation. This method of valuation involves the capitalisation of the net normalised income to determine a market value of the subject property. The total revenue and expenses of the subject property must therefore be calculated before a capitalisation rate can be applied.

Based on the 2024 property valuation report for portion 108 (a portion of portion 27) of the farm Weltevreden, the fair value has increased from the valuation performed in July 2023.

As the valuation for Portion 1 Erf 4172 Garsfontein was previously undertaken in June 2023, and the next valuation will be undertaken in three years’ time, the value of the property as at 30 June 2024 has remained an unchanged.
6.2 Recognised fair value measurements
 
Fair value hierarchy

The following hierarchy is used to classify financial and non-financial instruments for fair value measurement purposes:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. The significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement.

Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

Specific valuation techniques used to value non-financial instruments include:

  • the fair value of the investment property is determined by using either the comparable sales method or the Income approach method of valuation.

The investment property has been classified as a level 3 non-financial instrument, i.e. the inputs are not based on observable market data. The carrying amount of the investment property approximates the fair value.

Group fair value measurements using significant unobservable inputs (level 3):

  Investment property
R'000
OPENING BALANCE 10 731
Fair value adjustment 1 769
CLOSING BALANCE 12 500
Valuation inputs and relationships to fair value

The fair value of portion 108 (a portion of portion 27) of the farm Weltevreden 202 is derived by an external property valuer using the comparable sales method. In applying this approach the valuer has selected other properties that have similar risk, growth and cash-generating profiles. This investment property is valued on an annual basis.

The fair value of the Portion 1 Erf 4172 Garsfontein is derived by an external property valuer using the Income approach method. In applying this approach the valuer used market value determined by capitalising the first year’s normalised net operating income. This investment property is valued every three years.

Management reviewed the valuation performed by the external valuer and is satisfied that the inputs used by the external property valuer are reasonable.

The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements.

Description Fair value at 30 June 2024   Unobservable  inputs Input value
used		 Sensitivity of unobservable inputs on profit and loss
Investment property 9 400   Price per block building rights per square metre R500 If the fair value per square metre increased by 10% then the value of the property would increase by R940 000 in profit or loss. If the fair value per square metre decreased by 10% then the value of the property would decrease by R940 000 in profit or loss.
Investment property – Garsfontein 3 100   Net rentable area R454 If the fair value per square metre increased by 10% then the value of the property would increase by R310 000 in profit or loss. If the fair value per square metre decreased by 10% then the value of the property would decrease by R310 000 in profit or loss.