South Africa’s listed property has outperformed bonds, equities and cash year-to-date and with interest rate cut expectations, the sector is likely to see further growth in earnings, higher retail spending, and share price up-side over time according to independent property analyst, Keillen Ndlovu.
“In global comparison, SA listed property outperformed other asset classes year-to-date thanks to their diversified portfolios whereas globally, listed property with mostly specialised assets underperformed and delivered marginally positive returns of 2.9% in Rand terms,” he says.
Year-to-date to July 2024, local listed property has delivered 14.4% in returns (income and capital growth) compared to bonds (9.8%), equities (10%), and cash (4.9%). The sector has recovered from being the worst performer delivering a negative 2.2% over the same period in 2023.
“Our members are reporting an improvement in property fundamentals – declining vacancy rates, rental increases – albeit off a low base, and demand for space, especially in industrial and logistic, retail and select office assets in key locations. We expect property fundamentals and earnings to continue to improve,” comments Joanne Solomon, CEO of the SA REIT Association.
There are currently 35 locally focused listed property stocks on the JSE of which 29 are REITs and six non-REITs with eleven offshore-focused stocks of which seven are REITs and four are non-REITs, according to Ndlovu’s research.
Ndlovu says that certain REITs appeal to investors in developed countries with growth rates like Spain and Poland as well as developed markets like the UK with lower risks in general.
“Even though REITs earnings will likely decline by 3%-4% on average this year mainly because of higher interest rates, earnings will return to positive territory in 2025 and to inflation-beating levels in 2026.”
“If the economy grows faster and interest rate cuts happen sooner and more aggressively, we can see robust growth in earnings earlier than 2026.”
Over the past few years, the sector has seen a decline in equity raised. From raising R69.4 billion in 2014, South African listed property raised R7.4 billion in 2023. However, there has been decent activity so far this year with Vukile Property Fund raising R1 billion and Sirius Real Estate raised £150 million from South African and offshore investors.
