SA REIT equity prices fell 3.6% in January but it is not uncommon for these stocks to lag the broader market in the first month. Picture: AI lab
The South African Real Estate Investment Trust (SA REIT) sector is poised to see positive distributable income growth for the first time in three years, despite a slower start to the year in their equity prices, according to Ian Anderson, compiler of the SA REIT Association’s monthly Chart Book.
January’s share price performance underscored investor concerns, and South African REITs saw a 3.6% decline in January, under-performing the broader equity market, which lifted by 2.3%. The equity market was driven by strong returns from the precious metals sector and the modest 0.4% gain in the bond market due to attractive real yields in South Africa.
He said only three companies posted positive returns in January, with Texton Property Fund leading the pack with a 12.5% gain. Accelerate Property Fund (2.1%) and Spear REIT (0.9%) also saw modest price increases.
Anderson said on Monday that interest rates were unlikely to fall as swiftly or as significantly as previously anticipated. The signing of the Expropriation Bill into law by President Cyril Ramaphosa had added uncertainty for some investors. This had weight on REIT equity prices.
“The threat of additional load shedding in February is also likely to dampen investor sentiment, and in this environment, SA REITs may struggle to build on the strong performance seen last year in the near term,” said Anderson in a statement.
Anderson noted that SA REITs began 2025 on the back foot, following US President Donald Trump’s threat to raise tariffs on countries such as Canada, Mexico, and China. As a result, global inflation was expected to remain elevated for longer, which presents challenges for REITs and other interest-rate sensitive sectors.
At their first policy meeting of the year, the US Federal Reserve kept interest rates unchanged, the first time since July 2024 that no rate cuts were implemented. This contributed to higher US bond yields in January. Meanwhile, the South African Reserve Bank's Monetary Policy Committee cut interest rates by 25 basis points.
Future rate cuts would depend on the outlook for global inflation and the scale of tariffs introduced by President Trump, said Anderson.
He said it was not unusual for South African REITs to start the year with negative returns. Since 2020, they had only delivered a positive return in January once, in 2024.
According to a recent report by global real estate company Savills, 2025 presented a dynamic landscape for the real estate sector, offering both opportunities and challenges. This year, the global real estate services company expects to see global real estate investment turnover rise by 27% to $952 billion, driven by lower interest rates and increased investor confidence, and to surpass the $1 trillion mark in 2026 for the first time since 2022.
Dr Andrew Golding, chief executive of the Pam Golding Property Group, said Savills’ latest Global Risks Report makes the point that perhaps unsurprisingly, geopolitical risks dominate concerns for 2025.
BUSINESS REPORT