January 14 2026 17:40
Two-year rally delivers 88% cumulative gains as dividend growth returns to double digits
South African real estate investment trusts (Reits) delivered a strong 38.6% total return in 2025, building on their 35.8% performance in 2024 to complete two consecutive years of exceptional gains, according to the latest SA REIT Association Chart Book. This suggests that the sector has fully recovered from the pandemic and that its momentum since has become sustained. Property values have moved closer to a real value according to buyers and sellers in the market. The sector’s discount to NAV has decreased markedly.
The total return includes capital growth and dividends. December saw the sector gain a modest 0.5% as markets wound down for the festive period, with limited news flow to drive prices. The stronger rand also weighed on several geographically diversified Reits with substantial offshore investments. But this quiet finish did not diminish the sector’s stellar annual performance, Ian Anderson, compiler of the SA Reit Chart Book and Head of Listed Property at Merchant West Investments said.
“The year’s trajectory exceeded all expectations,” said Anderson. After a challenging first quarter that saw the sector down 4.1%, SA Reits recovered. By year-end, the fourth quarter alone had delivered 21.5% as companies raised their distributable income guidance and dividend growth at sector level jumped to 10% year-on-year in the third quarter, having been at zero for the better part of three years.
Delta Property Fund was the standout performer, returning 105.3% for the year, followed by Fairvest at 62.9%. Heriot (49.9%), Vukile (48.3%), Growthpoint (47.6%) and Resilient (47.5%) also made large gains. However Delta is a penny stock with a market capitalisation of R279m and its R0.38 share price. Comparatively, Vukile, the retail specialist with exposure to SA and Iberia has a market capitalisation of R34.7bn and a share price of R25.13.
Over the past three and five years, South African Reits have comfortably outperformed both the local equity and bond markets, cementing their position as a compelling asset class for investors seeking income and growth.
“At the start of 2025, very few analysts and market commentators could have envisioned just how successful 2025 would be for South African Reit investors. The end of loadshedding and more clarity on global tariffs helped boost investor sentiment towards the sector. At the same time, company management teams were becoming increasingly optimistic about the medium-term prospects for their businesses,” said Anderson.
Following a strong recovery, South African Reits will enter 2026 on a firmer footing. While the exceptional capital gains of the past two years are unlikely to be repeated, the sector continues to offer compelling income yields, improving fundamentals and attractive relative value, according to Anderson.
“Total returns are likely going to be skewed towards income rather than capital gains. The outlook for dividend growth of between 5% and 8% per annum over the next two to three years is supportive of current valuations and likely to drive some capital appreciation in the medium-term,” said Anderson.
The macro backdrop for South African Reits has improved significantly, with lower interest rates, the end of loadshedding, removal from the financial grey list and a sovereign credit rating upgrade all contributing to a more favourable environment. These factors should result in higher capital flows, a lower risk premium and improved access to capital markets.
“All said, this should result in total returns of between 12% and 15% per annum over the medium-term, which is likely to be in line with the South African equity market and a lot higher than South African bond and money markets. For long-term investors, SA Reits should continue to play a valuable role as an income-oriented asset class, with opportunities for selective capital appreciation,” said Anderson.
The SA REIT Association Chart Books are available for download here.
alistair@propertyflash.co.za
