Advice and Opinion

Investing in property may be easier, safer and more affordable than you think

If you’ve ever wanted to own property, but thought it was it was difficult and expensive, it is time to think again.

Listed property could be the simplest, safest and the most affordable way to make a property investment.

“Investing in listed property, like SA REITs, is less costly than owning a physical property, plus it offers all the benefits, and more, of direct property ownership,” says SA REIT Association Marketing Committee Chairman Laurence Rapp. The SA REIT Association represents the South Africa’s listed REIT sector. Its members comprise all listed SA REITs and represent around R230 billion worth of real estate assets.

The quality of these SA REITs influence our economy and the quality of people’s lives. SA REITs are also making it easier for all South Africans to gain access to the benefits of property ownership.

SA REITs invest in commercial properties like shopping malls, offices and office parks, factories, warehouses, hotels, apartments and hospitals in cities and towns across the country. Owning an investment in a REIT, is like owning a small part of each of its properties. It is an investment in a tangible asset, but without the hassles of direct property ownership.

“Investing in listed property is easier than buying a property. You don’t need as much money, nor are you subject to long-term mortgage bonds and the costs are significantly lower,” explains Rapp. “You don’t have to find tenants to pay rent to get a return on your investment, nor do you have the responsibility of maintaining your property.”

Also, REITs are easy to buy and sell on the JSE, while a property takes time to sell and carries transfer duties, estate agents fees, and other requirements. Investors can also place small investments in REITs, making it significantly more affordable than buying even a tiny residential apartment.

The benefits of investing in REITs go even further. “Most SA REITs own several kinds of commercial properties, which gives investors exposure to a wide range of properties across different classes of property, instead of only exposure to one particular property,” explains Rapp. This reduces the risk of your investment. “The vast majority of investors wouldn’t normally have access to these properties, like large iconic shopping malls.”

Investing in REITs also offers a geographical spread of properties across the entire country. Some REITs even invest in properties abroad.

“There are many ways that REITs provide investors with confidence and comfort,” explains Rapp. SA REITs have professional managers who maximise the performance of their properties. They carefully choose which properties they hold, ensure the properties have strong creditworthy tenants and actively manage and improve the properties.

REITs are also regulated by legislation. They are required to practice excellent governance and provide regular reporting. REIT directors are accountable to the JSE or FSB, depending on how each REIT is structured.

“This means you can be confident your property investment is well looked after,” explains Rapp.

Like direct property, REITs are a longer-term investment. REIT investors earn regular, predictable and tax-efficient annuity income that can grow each year from an investment that also offers capital growth potential.

REIT earnings can be projected with a fair degree of accuracy, which is handy for investors. This is because SA REITs earn income from property lease agreements. These lease contracts include built-in annual escalations, currently around 8% on average for commercial property. This means REITs receive rental income that increases each year, which leads to growing income returns.

Rapp also explains that an investment in REITs actually tends to be more valuable than its properties. “Because of their marketability and size, several listed property counters trade at a premium to net asset value. REITs are also tax efficient investments.”

Most South Africans were denied the right to own property under apartheid. This means that many South African’s have never experienced the advantages of property investment. “REITs are an affordable, safe and easy way for all South Africans to unlock the benefits of property ownership,” says Rapp.

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