Best news for South Africa’s property market in five years
South Africa’s real estate investment trusts (REIT) sector is significantly stronger and more resilient than it was five years ago, with improved fundamentals, healthier balance sheets, and better positioning to withstand global uncertainty and market volatility.
Ian Anderson Head of Listed Property and Portfolio Manager at Merchant West Investments and the compiler of the SA REIT Association’s monthly Chart Book.
Even though global markets have been turbulent, South African real estate investors are in a good position at the moment. This is because the local REIT sector is in significantly better shape than five years ago.
Anderson drew a stark contrast between the present and the sharp downturn the sector experienced during the Covid-19 pandemic.
“The current turmoil in global financial markets comes almost exactly five years after the last major drawdown for South Africa’s listed property sector when the South African economy was shuttered at the start of the pandemic.”
Notably, between March 2017 and March 2020, South African REITs lost an average of more than 70% of their value, Anderson said.
In the years since, the sector has clawed back nearly 68% in value (excluding dividends), though it remains more than 50% below March 2017 levels.
Understandably, with fresh waves of political and economic uncertainty spreading across global markets, investors are questioning whether history might repeat itself.
However, Anderson assured that large drawdowns from current levels are highly unlikely. This is because of several key reasons.
Firstly, South African REITs are trading at significant discounts to net asset value, unlike the premium conditions seen at the end of 2017.
Secondly, the sector has spent the post-pandemic years strengthening its balance sheets through lower payout ratios, strategic asset recycling, and timely equity capital raised, bringing down loan-to-value ratios across most of the sector.
REITs resilient despite global volatility
Anderson said that while economic growth may be sluggish or even turn negative, the context is vastly different from that of 2020.
“Economies remain open, tenants continue to trade, and rents are being paid. That’s a far cry from the conditions during April and May of 2020.”
However, he warned that short-term volatility will likely persist, particularly as geopolitical tensions and trade disputes dominate global headlines.
The trade war between the United States and China will be especially influential in this regard. Beneath that noise, property fundamentals in South Africa continue to improve.
“Companies that reported results in March, including sector heavyweight Growthpoint Properties, all reported improved trading conditions in their South African portfolios.”
Growthpoint, for example, has revised its guidance upward. It went from a decline in distributable income per share (DIPS) to expected growth between 1% and 3% for the year ending June 2025.
The company saw a 6.2% increase in South African net property income for the six months to December 2024. The V&A Waterfront also recorded a 16.6% surge in like-for-like net property income, driven by increased tourism.
Other REITs, similarly, showed positive momentum. Resilient exceeded its dividend guidance after posting a 7.5% increase in comparable net property income.
Hyprop Investments also delivered improved results and raised its dividend payout ratio thanks to a healthier balance sheet.
While 2025 has been more subdued than 2024, Anderson maintained that the sector’s path forward remains promising.
“The improving property fundamentals in South Africa continue to point towards a return to net property income and dividend growth for the sector over the next 2 to 3 years. Investors should not lose sight of that.”
In his view, the South African REIT sector is not only stronger than it was five years ago – it’s also better positioned to weather the uncertainty that lies ahead.
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