June 2022 was a torrid month for SA’s listed property sector The listed property sector had a month to forget this past June as global economic weakness and uncertainty in the wake of the war in Ukraine and rising fuel and food prices made investors buy safe havens such as gold and other commodities.
The listed property sector experienced double digit negative returns in June 2022 as indicated by key indexes: the South African Listed Property Index (Sapy) and All Property Index (Alpi) delivering total returns of -10,3% and -10,5%. These were both worse than bonds and equities which returned -3.06% and -8.01% respectively. The Sapy includes the twenty largest and most liquid property stocks on the JSE while the Alpi includes all of the property companies listed om the JSE.
“This is on the back of negative investor sentiment primarily due to spiking inflation, rising interest rates and recessionary fears,” said Craig Smith, head of research at Anchor Stockbrokers.
Mall owners Accelerate Property Fund(APF) and Safari(SAR) were the top performers with total returns of 14.7% and 9.6% respectively in May. But UK mall owner Hammerson plc (HMN) and mall owner Rebosis Property Fund’s A shares (REA) were the weakest performers for the month of May with total returns of -29,7% and -44,4% respectively. Office vacancies also hit an all time high at 16.7% at the end of March, according to the SA Property Owner’s Association (Sapoa). But if you speak to brokers, they may say it’s more like 25%.
Historically an economic growth rate of at least 3.5% was needed to drive private sector employment growth and as a consequence fill up of office space.
“Current economic growth forecasts largely fall short of this while increased working from home will also continue to impact on the high rate of vacancy, which has also meant downward pressure on asking rentals,” said Smith.
Constant load shedding is also creating chaos for business owners and landlords who have to spend millions on diesel to run generators.