February 11 2024 07:45
Ian Anderson, Head of Listed Property and portfolio manager at Merchant West Investments, as well as compiler of the SA Reit Association’s monthly Chart Book, said the South African Real Estate Investment Trust (SA Reit) sector is poised to see positive distributable income growth for the first time in three years.
Nevertheless, interest rates are unlikely to fall as swiftly or as significantly as previously anticipated,
while the signing of the Expropriation Bill into law by President Cyril Ramaphosa has added
uncertainty for some investors.
“The threat of additional loadshedding in February is also likely to dampen investor sentiment
and, in this environment, SA REITs may struggle to build on the strong performance seen last year
in the near term,” Anderson said.
He said SA Reits began 2025 on the backfoot, following US President Donald Trump’s threat
to raise tariffs on countries such as Canada, Mexico and China. As a result, global inflation is
expected to remain elevated for longer, which presents challenges for Reits and other interest-rate
sensitive sectors. January’s share price performance underscored investor concerns.
At their first policy meeting of the year, the US Federal Reserve opted to keep interest rates
unchanged, marking the first time since July 2024 that no rate cuts were implemented. This decision
contributed to higher US bond yields in January. Meanwhile, the South African Reserve Bank’s
Monetary Policy Committee did reduce interest rates by 25 basis points, although the decision
wasn’t unanimous. Future rate cuts will depend on the outlook for global inflation and the scale of
tariffs introduced by President Trump.
Against this backdrop, South African Reits saw a 3.6% decline in January, underperforming the
broader equity market, which rose 2.3%, driven by strong returns from the precious metals sector
and the bond market, which posted a modest 0.4% gain because of attractive real yields in South Africa.
Anderson said it is not unusual for South African Reits to start the year with negative returns. Since
2020, they have only delivered a positive return in January once, in 2024.
This year, only three companies posted positive returns in January, with Texton Property Fund
leading the pack with a 12.5% gain. Accelerate Property Fund (+2.1%) and Spear REIT (+0.9%) also
saw modest price increases.
The SA Reit Association includes Reit members and aims to be the voice of the real estate investment trust (REIT) sector in South Africa. The organisation promotes protects the interests of the Reit sector through advocacy, support, and education, as well as provide members with tools they need to succeed, and highlight the sector’s contributions to the national economy.
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