If you are considering investing in South Africa, real estate is one of the best options. This is a conservative scenario which will enable you to generate a small, but stable revenue stream. You can opt to invest in the market indirectly through tried and tested funds or buy best property shares in management companies. We will tell you here about companies worth considering.
Reasons to Invest in South African Real Estate
At present the South African market is not overheated, and who knows – perhaps it will soon experience growth comparable to that in Dubai. For the time being, however, this is more of an option for anyone ready to explore new niches.
Cape Town. Photo: SkyPixels
Although record sales have been registered in the premium real estate market, especially in areas like the Western Cape, there has been a general slowdown in the rate of sales. At the same time, prices are stagnating in some areas, eliciting the displeasure of investors. That is why location and investment projects require a considered approach.
One option is to trust professionals and invest through specialist funds or management companies. In any case, local players know the market better. As they can draw on large portfolios, they can diversify their risks more effectively than a private investor who has only one or two flats. You can also choose the shares of a company specialising in commercial real estate. With the right management, shopping centres or warehouses are capable of generating a steady income.
Seven Companies Listed on the Johannesburg Stock Exchange
If you buy the shares of listed companies, you can earn income from real estate without owning it directly. You will find it far easier and quicker to withdraw from such investments than from ownership of actual real estate. In addition, the asset management load is far lower.
NEPI Rockcastle
This is the largest real estate company on the Johannesburg Stock Exchange. The investment portfolio of NEPI Rockcastle equals approximately EUR 6,000,000.
The company owns and operates shopping centres in Central and Eastern Europe: Poland, Slovakia, Romania, Croatia, Bulgaria, Czechia, Serbia and Hungary.
The three major shareholders of NEPI Rockcastle are Fortress Income Fund, Resilient Reit Limited, and the Government Employees Pension Fund. The interest of a state investment corporation is also a positive sign for private investors.
Three rating agencies monitor the state of the company and have issued positive ratings on its performance: Standard & Poor’s (BBB, stable), Fitch (BBB, stable), and Moody’s Investors Services (Baa3, positive).
Growthpoint Properties
This is the second largest company listed on the Johannesburg Stock Exchange in terms of market capitalisation. Its portfolio includes more than 400 properties in South Africa: offices, retail and industrial real estate. Growthpoint also invests in social infrastructure: hospitals and student dormitories. In addition to South Africa, the company owns properties in Australia.
Johannesburg. Photo: Sherissa R (Pexels)
The company has been operating since 1987 and has proven itself to be a reliable vehicle. Notwithstanding the unstable situation on the global economy, Growthpoint’s shares remain in demand and their share price is resilieееnt. And in the event of further stabilisation of macroeconomic indicators, investors can expect a good return on its shares.
Redefine Africa
This is a real estate investment trust (REIT) with diversified assets. It invests in different real estate properties based on type and geography, but focuses primarily on South Africa (the country accounts for about 85% of its projects).
The trust’s portfolio includes retail, office and industrial facilities – in total, about 350 properties. Such a diverse portfolio enables the trust to virtually guarantee a stable return for investors. In the next financial year, the trust is forecasting 7.3% dividend growth.
Attacq
This is another real estate investment trust. Notably, its shares have appreciated by 17% in a year.
The trust invests in both operating properties and projects under construction: shopping centres, offices and industrial real estate. The geography of investments includes South Africa, the rest of Africa and Europe. The trust has also invested in the South African landmark projects: Waterfall and Waterfall City.
Exemplar REITail
The shares of this company grew by 25% in a year. It has a curious niche: it owns and manages retail properties in rural South Africa.
Its portfolio includes more than 20 properties in five provinces, with most of them built by MPD. This company has 35 years of experience on the retail market. MPD knows the niche quite well and is preparing several interesting projects.
West Coast National Park, Western Cape Province, South Africa. Photo: Winfried Bruenken
Dipula A
Dipula A is an investment fund delivering positive share growth: +12% per year. This company finances real estate projects and focuses on long-term investments. The fund acquires retail, office and industrial properties through its subsidiaries.
The fund has a portfolio of approximately 200 assets, with 50% of the cost attributable to the 20 largest properties. Shopping centres account for 60% of the fund’s assets. Interestingly, like Exemplar REITail, Dipula A works with low-income buyers in rural areas and villages as it believes in the potential of this segment. However, the fund also has properties in central business districts across the country.
Fortress REIT Limited
While the results of this fund over the past year were not as impressive compared to the aforementioned funds, it is one of the top five real estate companies listed on the Johannesburg Stock Exchange in terms of market capitalisation and one of the top three among real estate investment funds in South Africa.
This is a hybrid fund that invests both directly in real estate properties and in other publicly listed companies in this segment.
The fund selects primarily high-quality logistics warehouses for direct investments and leases them to corporate tenants on long-term leases. Such warehouses account for approximately 42% of the portfolio. They are followed by retail (35%), industrial (13%), and offices (10%)
In a Nutshell
For the time being, the South African real estate market is not that transparent and attractive for individual investors. However, a number of companies in the country could help you to take the first step. Local investment funds often work with real estate not only in South Africa, but also in Europe or Australia. They also diversify their portfolios, by including different types of real estate: warehouses, shopping centres, offices, residential centres, and even dormitories or hospitals.
