South African Listed Property On the Growth Path
2013 is expected to see note-worthy growth for South African listed property according market experts. We are well into the year and from this vantage point the rest of 2013 is looking healthy as the sector out-performs equities, cash and bonds for the fourth year running.
Property Loan Stock Association (PLSA) chairman and CEO of Growthpoint Properties Limited believes investors can expect distribution growth from the sector to average between 5% and 8% in 2013. He anticipates listed property total returns between 10% and 16%. These figures are well below the total returns of 2012, though positive nevertheless. The advantage of this sector is that it can uniquely predict its short-term performance with good levels of accuracy, as its performance is underpinned with rental income from contractual agreements.
Sass reported to the Property Loan Stock Association (PLSA) that “With tougher market conditions overall, companies that can manage vacancies and costs are better positioned to deliver performance for investors,” says Sasse. “Sectoral portfolio composition will also influence performance. Weak demand will continue in the office sector. However, retail and industrial property will perform well off a base of low vacancies that should remain stable.”
The Property Loan Stock Association (PLSA) is the representative umbrella body of the property loan stock sector comprised of voluntary members, with the weight of nearly all of the funds within the sector behind it. The association has been modelled on NAREIT (National Association of Real Estate Investment Trusts) in the United States.
The PLSA newsroom quotes head of Listed Property Funds for Stanlib’s Keillen Ndlovu, who anticipates growth in the sector equal to or greater than inflation, thereby protecting investors’ income against inflation. She said: “listed property income should grow by over 6% in 2013 and improve to 7% in 2014. Our base case for listed property total returns in 2013 is 9%. Our bull case forecasts 16% total returns and our bear case only forecasts 2.2%.” The conventional wisdom here is that listed property is a great diversifier. It produces a regular source of growing income and capital growth over time.
Norbett Sasse predicts corporate activity from the sector carrying into 2013, especially the merging of smaller funds creating a critical mass in defence of hungry larger funds aggressively pursuing acquisition strategies.
It seems that newly listed property companies are continuing their growth strategies. However, they are beginning to step on each other’s toes as there’s limited physical property stock out there. Most listed property funds are playing in similar territories. Limited stock means that listed property companies will start to eye each other. This could lead to mergers and takeovers.
During the last two years, the sector saw a spate of new listings. While more companies are expected to join the sector, the number is likely to decrease in 2013. South Africa’s first residential listed property fund could debut this year. Equity raisings are looking to remain prominent in the sector, but not to the same extent as in recent years. About R11 billion of equity came into the listed property space in 2012. In 2011, it was about R16 billion.
April saw REIT (Real Estate Investment Trust) legislation being introduced in South Africa. Spearheaded by the PLSA for its positive impacts on the sector, this legislation will provide tax certainty and align South Africa with global investment structures and established REIT markets like the US, Australia, Hong Kong, Singapore and the UK.
Posted on June 18, 2013, in Commerce, Property and tagged economy, Growthpoint Properties, NAREIT, national association of real estate investment trusts, property loan stock, Property Loan Stock Association, real-estate, Stanlib. Bookmark the permalink. Leave a comment.