South African listed property outperformed local bonds, equities and cash in 2012. Marc Wainer, CEO of Redefine Properties, says that 2013 will be another good year for listed property but it is unlikely to match the outperformance of 2012.
“Expect total returns between 14% and 18% from the sector,” says Wainer.
Introducing the new South African REIT (Real Estate Investment Trust) in April 2013, will be a positive catalyst for the sector in the coming year. “Apart from the many benefits of the new REIT legislation, including tax certainty, it should result more international investors in our sector. Interest from international investors remains high and this is where growth will come from.”
Wainer notes with concern, however, that a further downgrade of South Africa’s credit rating would hurt the sector. “This would result in a sell-off of South African bonds and depress the price of listed property securities.”
With most of its component funds on a keen growth trajectory, the sector should continue growing in the year ahead. For some companies, gaining new assets won’t be easy. Wainer explains that acquiring prime properties is increasingly difficult for listed property companies, and this challenge will persist in 2013. “Smaller funds should enjoy high levels of acquisitions though,” says Wainer.
To add suitable property assets to investment portfolios, the sector will play a bigger role in developing new properties countrywide, particularly retail and industrial properties.
“Development will follow sector performance. The retail property sector should keep showing growth and industrial properties are on track for continued improvement. The office sector, however, will underperform again,” says Wainer.
Listed property will also look for growth opportunities beyond South Africa’s borders.
“Offshore investments will continue to play a greater role for some of the larger players as there is still good value on offer,” says Wainer. “Some listed companies will start to play an increasingly larger role in other African countries.”
Mergers will also contribute to listed property fund growth, according to Wainer, especially between the sector’s newer and smaller funds. He sees a few more listings on the cards for 2013; possibly with some large single properties, like shopping precincts and shopping centres, anchoring new funds.