Three years ago most investors didn’t want to touch listed property with a barge pole. How times have changed. The JSE’s all property index (Alpi) has risen a whopping 60% in the past two years, notwithstanding the 12% pullback in March after the US-Iran war erupted.
In fact, March’s slump has been short-lived, and several property stocks — South Africa-based real estate investment trusts (Reits) in particular — are now trading at or near seven-year highs as they continue to rebound from a prolonged post-pandemic slump.
That’s unlike general equities, which saw a fall in share prices in recent weeks. The Reit sector has not only built a decent lead on general equities in the year to date but has also comfortably pipped bonds, which is interesting, given how closely listed property usually mirrors movements in the bond market.
The Alpi has risen about 7% from January to July. The all share index (Alsi) is down 1.8% over the same period and bond returns slowed to 2.8%. Over 12 months, listed property shows a total return of a decent 26% vs the Alsi’s 17%. That’s a sharp turnaround from 2025, when general equities’ 42.4% total return significantly outstripped the Alpi’s 30.6% (see graph).
Figures from equity research firm Golden Section Capital show that Gauteng-focused Octodec Investments, which owns a large rental housing and retail portfolio in the Pretoria and Joburg CBDs, leads the pack among the Alpi’s 23 constituents year to date as well as over the 12 months to July 31, with a whopping 81% one-year total return. The Reit’s share price has no doubt been supported by the stock’s return to earnings growth on the back of several disposals of underperforming assets coupled with corporate action initiated by value chaser Emira Property Fund, which acquired a sizeable 23.5% stake in Octodec earlier this year.
Other South Africa-based counters that delivered a total return of more than 30% over the past year include sector heavyweights Redefine Properties, Hyprop Investments, Resilient Reit, Growthpoint Properties and Vukile Property Fund. The sector’s leaderboards are also topped by Western Cape-focused Spear Reit — which continues to build a loyal following of investors looking to share in the bull run of the province’s real estate market — as well as perennial outperformer Fairvest, which owns several mid-sized shopping centres in rural areas and townships that cater mostly to lower-income shoppers, and Dipula Properties, which, alongside Octodec and Spear, was included in the Alpi in March for the first time (see table). The only rand hedge property stock that matched the Alpi’s return is Hammerson, which owns a portfolio of prime shopping destinations in the UK, Ireland and France and emerged in much better shape this year after a multiyear restructure.
The laggards include mostly rand hedge stocks such as Shaftesbury Capital, which owns London’s Covent Garden precinct, Germany-focused business park owner Sirius Real Estate and Eastern Europe-focused MAS PLC, which was the subject of acrimonious corporate action last year and still hasn’t resumed dividend payments. Accelerate Property Fund is the sector’s worst-performing domestic Reit, despite a notable turnaround in trading at Fourways Mall, its flagship asset, in the past year.
Catalyst Fund Managers property analyst Bontle Seema says the resilience of the South African listed property sector reflects investors’ preference for defensive, income-generating investments during times of uncertainty.
She says operating metrics in underlying retail, industrial and office portfolios have also improved notably, with most property stocks reporting lower vacancies and an encouraging uptick in rentals on lease renewals in recent months. That’s in stark contrast to the previous five years, when landlords were typically forced to slash rentals or risk losing tenants when leases expired. Landlords are even starting to see a more meaningful uptake of space in the long-suffering office sector.
More importantly, property stocks are now firmly back in inflation-beating dividend growth territory, with average growth guidance of 7%–8%. That’s a notable turnaround from 12 to 18 months ago, when most Reits were still battling declining earnings. Catalyst figures show at least five counters that expect double-digit growth for their respective 2026 financial years. They include Waterfall City developer Attacq, Rosebank Mall owner Hyprop, Fortress Real Estate Investments, Fairvest and Vukile, whose R51bn portfolio is split between South Africa, Iberia and Italy.
As Seema puts it, “high single-digit distribution growth guidance across the sector continues to reflect an industry in recovery, supported by lower funding costs, improving property valuations and disciplined capital allocation”.
Ian Anderson, portfolio manager and head of listed property at Merchant West Investments, says the sector’s ongoing strength is encouraging, given bonds’ recent retreat. “For most of the past two years the Reit sector’s returns have moved with the bond market and the interest rate view. In July they did not,” Anderson says. He ascribes the anomaly to listed property’s much-improved dividend growth prospects.
He says local Reits are now achieving average dividend growth just shy of 11% (rolling 12-month distribution growth). That’s double June’s CPI of 5% and the highest growth recorded since the sector’s heyday from 2015 to 2018.
“Reits delivered a positive return in a month when bonds retreated, which tells you the income line is now doing the work that lower interest rates were doing in 2024 and 2025,” Anderson says. He also points to several oversubscribed capital raises in the year to date, including Hyprop’s increase last month of its initial target of R500m to R739m, which he says underscores the extent to which investor sentiment has been restored.
Still, the question arises whether investors who haven’t yet climbed back into listed property have missed the boat.
Not necessarily. Seema tells the FM that how much upside is left will depend on whether management teams can deliver on their earnings growth promises. “Sentiment for the remainder of the year is likely to be shaped by the pace of property-level earnings delivery relative to guidance,” she says, particularly as the Alpi’s discount to NAV has narrowed significantly, which Seema says makes share prices more sensitive to “operational execution”.
Despite renewed uncertainty about where interest rates and inflation are heading on the back of ongoing geopolitical tension, Seema says listed property offers a “defensive income profile with moderate rerating risk”. But she doesn’t expect a repeat of last year’s stellar gains. Catalyst has pencilled in a total return of 11%–14% a year over the short term.
Anderson agrees that the biggest risk now is that June’s inflation reading of 5% proves the start of a trend rather than a temporary move higher, which would potentially trigger a further rate hike. He says while most Reits have reduced debt in recent years via the disposals of noncore properties, capital raises and cost-cutting, the capacity to absorb higher debt funding costs varies widely from Reit to Reit. “Balance-sheet quality rather than a broad sector view is likely to determine outcomes from here,” he says.
Others are more cautious. “While the headline numbers suggest listed property remains a sector worth holding, cracks are appearing,” says equity research firm Golden Section Capital MD Garreth Elston.
He agrees that the sector entered the third quarter on the front foot, with most property stocks expecting high single-digit or low double-digit distribution (and dividend) growth this year and that investor sentiment has rebounded sharply. That much is evident from the extent to which the sector’s discount to NAV has closed. Elston notes that that figure is now at only about 8% — a far cry from the 30%–50% discounts that most Reits were trading at three years ago.
However, Elston questions how long operational improvements in underlying property portfolios can stave off monetary headwinds. “The lower-for-longer rates thesis that helped drive the 2025 rerating no longer holds, and the funding-cost relief embedded in current guidance may prove harder to bank than the market assumes.”
He argues that distribution growth is a backward-looking statistic. It reflects funding costs locked in during the 2025 rate-easing cycle, rental escalations contracted in a lower-rate world and a consumer who was still borrowing. “The forward-looking indicators tell a different story.” Elston says the inflation and interest rate outlook has since turned, with middle-income consumers becoming increasingly overstretched. That’s already showing in lower foot count in larger-format shopping centres that rely on discretionary spending.
He notes that the sector’s upbeat growth guidance rests on two assumptions that look increasingly hard to sustain: a soft economic landing and an accommodating Reserve Bank.
The flip side, says Elston, is that several factors could provide further support for listed property into 2027. These include a durable end to the US-Iran conflict, which will take the geopolitical premium out of the oil price, relieve fuel-led inflation and open the door to the rate cuts the sector’s guidance assumes. He adds that a constructive outcome for the local government elections and a broader easing of geopolitical tension would also support confidence and the currency. “Any of them are plausible and would improve the picture for listed property materially.’’
Meanwhile, property investors will no doubt keep a close watch on the numbers released during the August/September results season, which should give some indication of the extent, if any, to which the recent rate hike and rising living costs have affected Reits’ growth expectations.
