Listed property sector 'could double in size'

The listed property sector could double in size over the next five to ten years, should it follow in the footsteps of its Australian counterpart.

Market commentators believe the introduction of the South African Real Estate Investment Trust (REIT) earlier this month could act as a catalyst for further listings. Rumours suggest that between ten and 22 property companies are waiting in the listing line, although experts note that companies could have difficulty in obtaining quality assets. The Atterbury Property Fund has recently indicated that it plans to list in the latter part of this year.

The SA REIT is in line with international best practice, offers tax benefits and could potentially lure offshore investors. Vukile has just become the first property loan stock (PLS) to covert to REIT.

Speaking at the launch of the SA REIT Association, Andrew Brooking of Java Capital, confirmed that the company has projects underway that would add about R20bn to the market cap of the sector in the short term.

The listed property sector currently has a market capitalisation of around R250bn. This is loosely comparable with the market cap of Sasol, which is around R270bn, according to Moneyweb data. The sector has grown significantly since 2000, when its market cap was a mere R5bn.

Estienne de Klerk, head of the REIT Committee, says an analysis of the Australian listed property sector has indicated that its market cap has been as high as 10% of the total market cap of the Australian Securities Exchange (ASX). The percentage has come down to around 6.8% since the global financial crisis.

Assuming South Africa follows the same trend and reaches 6% or 7% of the JSE’s market cap in the next five to ten years, the listed property sector could more than double in size, says De Klerk.

“We are currently roughly about 3.5% of the total JSE’s market capitalisation,” he says.

However, one has to keep in mind that the Australian commercial property market is one of the most developed in the world and it is therefore very difficult to make a local growth estimate, since it will to a large extent depend on how many companies want to list, he says.

Norbert Sasse, chairman of the SA REIT Association, says the introduction of REIT could encourage a number of companies that might have been quite happy to remain private companies, to convert to REIT and come to market.

The REIT regime is very flexible – the tax dispensation does not prescribe whether the entity has to be internally or externally managed and it does not advocate as to the kind of property assets that these entities have to own, adds De Klerk.

“So that leaves the door wide open for residential listings, for listings potentially in healthcare, for listings… even in hospitality potentially, although that comes with certain complications.”

Adds Sasse: “I think the key there is the definition of rental – to be a REIT 75% of your income needs to be rental as defined and I think that is where the hospitality one has got its challenges.”

De Klerk says it is their understanding that all 20 property loan stock companies (PLS) as well as the six property unit trusts (PUT) that are members of the SA REIT Association will be moving to the REIT board in due course. This could see the local listed property sector becoming the eighth largest REIT market globally by next year (there are around 25 REIT markets). 


  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us