Investment Case for Listed Property in South Africa

LAGOS (Capital Markets in Africa) – Listed property has been South Africa’s top performing asset class in the last 16 years. During this time it has returned over 18% per year (in Rand terms) as measured by the Johannesburg Stock Exchange’s (JSE) SA Listed Property total return index. It slightly outperformed the South African industrial sector which returned 17.85% per year during the same period. The returns from the industrial sector were however thanks to local market favourite Naspers and their over 30% investment in Chinese tech giant Tencent. But that’s a South African success story for another day.

In recent months however, the South African listed property has had a massive market correction. It has lost more than 20% of its value in a drawdown that started on 29 December 2017. It has still not recovered by 30 June 2018. The graph below indicates it has only recovered 4% from its lowest point during this 6 month period.

The current drawdown might be the worst the SA Listed Property Sector has seen but is not the first time this sector has had a massive correction. Between 27 October 2015 and 18 March 2016, the sector also lost 20% at its worst point in a drawdown that lasted 5 and a half months.

So what caused the latest correction? It all started in early January 2018 with speculation that US research firm Viceroy, famed for their report that brought down Steinhoff International, will be releasing a damning report into SA listed property Group Resilient. Panic selling occurred across the entire listed property sector in sympathy for the property giant.

An extract from INTO AFRICA August Edition: Driving Africa Opportunities. The article is written by Magnus de Wet (Managing Director, Vista Wealth Management South Africa) and to read the full article, please download by clicking: INTO AFRICA PUBLICATION: AUGUST 2018 EDITION.