South Africa Real Estate Investment Trusts (REITs) delivered a 11.1% total return in the first half of 2024, making listed property the best of the various investment asset classes, according to data published by the SA REIT Association.
This followed a strong June when share prices of property companies rallied 9.4%, after the formation of the Government of National Unity (GNU), the latest Rode Report said.
The best performing REITs in the first half in terms of total returns were Attacq with a 21.1% return, Emitra 26.9%, Texton 32.8%, Fortress-B 26.2% and Fairvest-B 17.7%.
Equities, represented by the JSE All Share Index, performed second best of the asset classes, with a 5.8% return in the first half, with SA-focused companies shining after the elections.
Bonds came in third and cash was fourth best. All the asset classes, except cash, saw an increase in total return in real terms in the first half, after deducting inflation of just above 5%.
“The early impact of the GNU on South Africa’s key industries cannot be underestimated. The initial vote of confidence could bode well for the commercial property sector as it continues its slow resurgence, but has since been met with mixed reactions,” Galetti Corporate Real Estate Advisory MD, Simon Wilkins, said yesterday.
He said the outlook however was optimistic, and while July marked another interest rate hold by the Monetary Policy Committee (MPC), he believed September’s announcement might paint a different picture.
He said that with inflation slightly lower and the petrol price decreasing, the MPC might be encouraged not to follow the lead of the US Federal Reserve on rates due to political turbulence in the US combined with positive performance locally, and interest rates may decline locally in SA as early as in September 2024.
He said the formation of the GNU might be the biggest driver that the property sector had experienced in a long time.
“The GNU impacts the rand, investor confidence and the subsequent rising and lowering of interest rates – crucial factors driving activity across every commercial asset class.”
The Rode Report said dividend growth from REITS remained scarce in the first half as REITS held back cash for operations or expansions, while keeping debt under control in the high-interest-rate environment.
“The formation of the new Government of National Unity (GNU) was generally well received by investors as evidenced by the strong run in SA stocks in June. Independently from the formation of the GNU, it looks more certain now that the first local interest rate cut could well occur before the end of 2024, with more easing to follow in 2025. Indeed, some economists have upgraded their view of economic growth for 2025,” it said.
In the over-supplied office property market, a modest local recovery continued in the second quarter, as evidenced by lower vacancy rates and slowly growing nominal market rentals, the Rode report showed. The market has been boosted by the return of some workers to offices since 2022, albeit in many instances in a hybrid way.
The industrial property market saw sharp nominal rental growth amid continued low vacancies. Nominal gross market rentals in South Africa for industrial space of 500 square metres grew 6,1% year-on-year in the second quarter. This was up from the 4.8% in the first quarter, the report said.
BUSINESS REPORT