South Africa’s real estate investment trust (SA REIT) sector is heading for a re-rating; the question is whether the sector will rally this year or next?
Being quite conservative in our relative rating and growth expectations, we arrive at a 2019 total return expectation of circa 12% for the FTSE/JSE All Property Index (ALPI). The main driver is the attractive - on a relative and absolute basis - initial forward yield and does not factor in a significant re-rating relative to bonds in 2019. However, our forecasts point to a more stable 2020 growth outlook, which should result in better re-rating potential a year from now.
Mohamed Kalla, Director and Portfolio Manager at Sesfikile Capital
With the cost of equity having increased substantially in South Africa, management teams of local property counters will need to focus on the pure property fundamentals of their organisations to ensure the property sector will become more robust and better positioned to deliver shareholder value over time.
Andrea Taverna-Turisan, SA REIT Association Marketing Committee Chairman