SA’s listed property sector is in a better shape now, than where it was five years ago, according to the latest data from SA Reit Association.
“The current turmoil in global financial markets comes almost exactly five years after the last major drawdown for SA’s listed property sector, when the SA economy was shuttered at the start of the pandemic,” said head of listed property and portfolio manager at Merchant West Investments, and compiler of the SA Reit Association chartbook, Ian Anderson.
According to Anderson, large drawdowns from current levels are highly unlikely, due to several key factors, including SA Reits currently trading at significant discounts to their net asset value — unlike the premium valuations seen at the end of 2017.
“Second, the sector has spent the post-pandemic years strengthening its balance sheets through lower payout ratios, strategic asset recycling and timely equity capital raises. This has helped bring down loan-to-value ratios across most of the sector,” Anderson said.
The latest outlook for dividend earnings suggests that the listed property sector is on track for a return to positive growth, with average earnings expected to rise by 3%-4% this year — a notable turnaround from the 3%-4% decline recorded in 2024.
Absa’s 2024 Morgan Stanley Capital International’s (MSCI) SA Property Index annual results, released last week, showed that commercial property transactions increased in 2024, reflecting strong market activity and positive net acquisitions.
The index showed that for the year ending December 31 2024, SA property investments delivered a total return of 11.5%.
The strong return was driven by rental growth of 4.8%, while overall vacancy rates remained stable at 6.6%.
According to the index, this was the highest annual total return since 2015, placing SA among the top-performing global real estate markets that have reported results for the 2024 calendar year.
Anderson said that although economic growth may be slow or even slip into negative territory, the situation is very different from 2020.
“Economies are still open, businesses are operating, and rental payments are being made — a stark contrast to the shutdown conditions of April and May 2020,” he said.
He cautioned, however, that short-term volatility was likely to persist, particularly as global headlines were dominated by geopolitical tension and trade disputes — especially between the US and China — alluding to US President Donald Trump’s raising tariffs and ruffling China’s feathers.
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