South African REITs outperform, but investors remain underexposed

South African Real Estate Investment Trusts (REITs) have become a cornerstone of diversified multi-asset portfolios, providing stability and attractive returns in an unpredictable global economy.

Since the early 2000s, REITs have grown significantly, now making up 4.9% of the JSE All Share Index (ALSI), 10.2% of the JSE Mid Cap Index, and 26.0% of the JSE Small Cap Index.

However, they are underrepresented in local balanced funds, with allocations averaging only 2.2% in 2024.

For 2024, SA Reits delivered an impressive 35% return, outperforming equities (13%) and bonds (17%).

Naeem Tilly, a member of the SA REIT Association Research Committee and portfolio manager & head of research at Sesfikile Capital, noted: “REITs remain underrepresented in local balanced funds, with allocations averaging just 2.1% at the end of the third quarter of 2024. This is despite their potential to enhance risk-adjusted returns, thanks to their low correlation with traditional asset classes like equities and bonds.”

The optimal allocation to property in local portfolios is 23%. Research from the SA REIT Association suggests that the recent increase in offshore limits under Regulation 28 has resulted in a significant shift towards foreign bonds and equities.

According to the Alexforbes Manager Watch survey, global balanced funds have seen an average allocation of 4.1% since 2018, dipping to 3.1% by the end of 2023.

“Combining assets with low performance correlation allows investors to reduce portfolio risk while preserving return potential, a key principle of effective portfolio optimisation,” said Tilly.

Tilly also pointed to REITs as a valuable asset class, offering significant diversification benefits. Since 1976, global REITs have shown low correlation with both the broader equity market (0.42) and bonds (0.37), which are typically core holdings in diversified portfolios.

A perfect positive correlation is +1, while zero correlation indicates no relationship. “In the past decade, the correlation with local bonds has increased to 0.49.”

REITs stand out for their key characteristics. They are required to distribute at least 75% of taxable income as dividends, which historically account for 80% of their total returns, helping reduce volatility during market stress.

The predictability of real estate leases and rental income provides a defensive edge, enabling more accurate earnings forecasts and lower share price volatility.

Additionally, REIT dividends are inflation-protected, unlike many bonds, as asset values and rental rates often rise with inflation.

Itumeleng Mothibeli, chairperson of the SA REIT Association Research Committee and MD of Vukile Property Fund Southern Africa, said that these findings align with global research from Oxford Economics, which underscores the complementary roles of listed and direct real estate investments.

Listed REITs, with their liquidity and diversification benefits, are ideal for higher-risk portfolios, while direct real estate offers stable income and consistent performance.

“The defensive qualities of South African REITs—such as their inflation protection and mandatory income distributions—make them essential for building resilient portfolios. By leveraging the unique advantages of REITs, South African investors can enhance diversification, stability, and long-term growth,” said Mothibeli.

As global economic uncertainties continue—driven by fluctuating interest rates and geopolitical tensions—reassessing strategic allocations to REITs presents significant potential for both local and international investors, Mothibeli added.

This iconic South African retail space achieved R10 billion in sales in 2024

The V&A Waterfront enjoyed an exceptional December, attracting over 3 million visitors and achieving record retail sales of nearly R1.4 billion.

“The December period is always special at the V&A Waterfront, with locals and tourists coming to experience the best of what we have to offer, and this year was no exception,” said David Green, CEOr at the V&A Waterfront.

“With over 3 million visitors for the month and 25 million visitors for the year, this reflects the incredible appeal of the Waterfront as a destination where people come to connect, celebrate, and create memories.”

Co-owned by Growthpoint Properties and the Government Employees Pension Fund, the V&A Waterfront has active projects worth R4.5 billion underway over the next two years. Funding for these developments is being arranged through debt providers on the Waterfront’s balance sheet.

The upcoming projects include a new hotel and residential units, alongside the redevelopment of the Table Bay Hotel and a section of the mall.

Approximately R2 billion of the investment will be directed toward two internationally branded hotels at the V&A Waterfront, including a R1 billion transformation of the iconic Table Bay Hotel into an InterContinental Hotels Group (IHG) property.

The reimagined hotel will offer 306 rooms, including 45 newly designed guest suites. Scheduled to open in 2025, the InterContinental Table Bay Cape Town aims to both preserve the hotel’s legacy and usher in a new era of luxury hospitality in the region. The hotel will be managed by Sun International under a hotel management agreement.

In addition to the Table Bay redevelopment, the development includes a new hotel at Quay 7 for approximately R1 billion, around 100 residential units worth approximately R750 million, and an upgrade of the luxury section of the mall, totalling just over R100 million.

A new parking facility will be added for R300 million, and a new heliport, costing about R150 million, has already been completed.

Significant capital is also being invested in bulk infrastructure at the site to support the new developments, which will span just under 100,000 square metres.

The V&A Waterfront also expanded its retail offering with the opening of the repurposed Union Castle Building just in time for the festive season.

This welcomed high-profile tenants such as Marble Restaurant, Nike, Thule, and Wedgewood. These new additions, alongside other tenant mix enhancements—including the enlarged and relocated Yuppiechef and Mr Price outlets—helped drive nearly double-digit sales growth.

More than R10 billion was spent within the precinct in 2024.

“During the year, we saw sales growth across most categories, but some sectors stood out. Our enhanced restaurant offering and Food Markets drove significant Food and Beverage revenue,” Green noted.

Increased international tourism helped boost performances at the revamped Watershed, Curios, and jewellery sectors. Athleisure and outdoor wear continue to see growing demand, and Health & Beauty remains a perennial favourite. In fashion, the retail space is seeing stronger performances from independent and differentiated stores.

“Looking ahead, our ongoing investment plans will ensure that the V&A Waterfront continues to innovate and evolve, keeping South Africa’s tourism offering at the forefront of global travel trends, for both local and international visitors to enjoy,” Green concluded.

Here is the petrol and diesel price for February in South Africa

South African motorists will have to dig deeper into their pockets as fuel prices are set to rise significantly from 5 February 2025.

The Minister of Mineral and Petroleum Resources has announced the latest adjustments, citing a combination of international and local economic factors driving the increase.

South Africa’s fuel prices are reviewed monthly, influenced by global crude oil prices, international petroleum product costs, and the exchange rate between the Rand and the US dollar.

This month’s surge is attributed to:

Brent Crude oil prices climbed from $72.78 to $77.41 per barrel due to increased demand driven by cold weather in the Northern Hemisphere and China’s economic stimulus measures.

At the same time, supply constraints arose as OPEC+ postponed production hikes until April 2025, coupled with sanctions against Russia and Iran, which pushed up freight rates.

Following the crude oil price trend, international petroleum product prices also spiked. Liquefied Petroleum Gas (LPG) saw an additional surge due to rising freight costs amid the winter season.

This led to price increases of 46.06 cents per litre (c/l) for petrol, 66.26 c/l for diesel, and 58.64 c/l for illuminating paraffin.

The rand depreciated against the US Dollar, averaging R18.73 per dollar compared to R18.11 in the previous period. This resulted in additional price hikes of 36.85 c/l for petrol, 39.58 c/l for diesel, and 38.61 c/l for illuminating paraffin.

The fuel price adjustments taking effect on 5 February 2025 are as follows:

-Petrol 93 & 95: up 82 cents per litre
-Diesel (0.05% sulphur): up 105 cents per litre
-Diesel (0.005% sulphur): up 101 cents per litre
-Illuminating Paraffin (wholesale): up 97 cents per litre
-SMNRP for IP: up 129 cents per litre
-Maximum LPG Retail Price: up 42 cents per kilogram

The official fuel price schedule for different zones will be released on 4 February 2025.

With these increases, South Africans can expect higher transport costs, which could have a knock-on effect on food and goods prices.

InlandJanuary OfficialFebruary Official
93 PetrolR21.34R22.16
95 PetrolR21.59R22.41
Diesel 0.05% (wholesale)R19.29R20.34
Diesel 0.005% (wholesale)R19.44R20.45
Illuminating ParaffinR13.26R14.23
LPGAS (per kg)R38.29R38.71
CoastalJanuary OfficialFebruary Official
93 PetrolR20.55R21.37
95 PetrolR20.80R21.62
Diesel 0.05% (wholesale)R18.50R19.55
Diesel 0.005% (wholesale)R18.68R19.69
Illuminating ParaffinR12.26R13.23
LPGAS (per kg)R35.33R35.75

Pick n Pay reveals 32 store closures

Retailer Pick n Pay Stores has reported a mixed trading performance for the 45-week period ending 5 January 2025, as it navigates the challenging retail landscape with a focus on improving operations.

While the company saw overall sales growth of 3.6%, a significant component of its strategy – the planned store closures and conversions under the “Store Estate Reset” plan – has impacted total sales figures, leading to a net closure of 32 supermarkets across South Africa.

The group’s SA operations closed 24 company-owned stores and 8 franchise stores, including the conversion of five company-owned supermarkets to franchise operations. This move is part of a broader effort to streamline operations and reposition stores for long-term sustainability, despite the natural consequences of reduced overall sales during the transition period.

Despite the closures, Pick n Pay’s like-for-like sales in its core supermarket segment showed improvement, rising 1.6% for the period. Pick n Pay South Africa, in particular, demonstrated solid growth momentum, with a 3.0% increase in like-for-like sales during the final 19 weeks of the period.

The Group remains optimistic, with the performance of Boxer Retail Limited standing out as a bright spot. Boxer, which operates in the lower-income segment, saw an 11.4% sales growth, including a 6.7% increase in like-for-like sales, reflecting strong demand for affordable groceries in both local and regional markets.

In the clothing sector, standalone Pick n Pay clothing stores experienced a 10% sales increase, with momentum accelerating to 10.3% during the final 19 weeks of the period.

Online sales also showed robust growth, rising by 42.5% as consumers increasingly turned to Pick n Pay’s e-commerce offerings, including the popular Pick n Pay asap! service and groceries through the Mr D app.

While store closures have impacted overall performance, the company is confident that its continued focus on improving retail disciplines, enhancing customer value, and refining its store estate will set the stage for further growth in the years ahead.

The group’s efforts to modernize its operations, combined with the strong performance from Boxer and online sales, reflect a balanced approach to navigating industry challenges while positioning for long-term success.

Shares in Pick n Pay have recovered remarkably over the past year, up more than 40%.

Expropriation Act poses no threat to residential property, says Seeff

There is no need for residential property owners, buyers, sellers, and investors to be concerned about the recently enacted Expropriation Act of 2024, says Samuel Seeff, chairman of the Seeff Property Group.

The new Act is very specific in terms of the conditions for expropriation, and, importantly, the protection of the “property clause” under Section 25 of the Constitution remains in place.

The Act, which replaces the outdated Expropriation Act of 1975, was largely expected by the property industry.

It has been in the works since 2018 and was passed by Parliament in March last year, the realtor said.

The concern is that expropriation has been sensationalised and conflated beyond the actual implications of the Act, Seeff said. Arbitrary property deprivation is specifically prohibited.

“While the Act provides for expropriation at nil-compensation, there are checks and balances contained in the Act. This includes that it must be in the public interest, and follow extensive consultation and negotiation with the courts having the final say if no agreement is reached.”

Seeff said further that Ppesident Ramaphosa and the ANC have also been firm in their commitment that no land grabs of whatsoever form will be tolerated.

“The aim is for expropriation to be lawful, and done with careful consideration so as to promote economic growth, development, and investor confidence.”

Seeff said that nil-compensation is also specifically confined to public interest.

Four potential scenarios are envisaged in Section 12(3), being (1) where land is held solely for speculative appreciation without productive use or development intent; (2) state land which is unused, and unlikely needed for future core functions: (3) abandoned land where, despite being reasonably capable, the owner has demonstrably relinquished control; and (4) where the market value of the land is less than, or equal to the state’s investment in its acquisition and improvement.

Seeff pointed out that the Act is also subject to the constitution, and it is expected that it will likely face rigorous legal challenges.

As for residential property, and having regard to the Zimbabwe experience, Seeff said that it never involved residential homes. Compensation has also since been paid for the expropriated farms.

There are also additional implications when it comes to residences such as the banks and mortgage loans over properties.

It therefore remains business as usual for the property market with the legal protections of private property in place. In fact, Seeff says the property market has started this year on a better footing compared to last January following three successive interest rate cuts which have hugely boosted affordability and confidence in the property market.

It is a new year, and many young professionals will be looking to get their foot on the property ladder, and what better time, he says. There is excellent value for buyers in the inland provinces, including Gauteng which usually sees the highest influx of first-time buyers in the country.

While the traditionally strong areas such as the Western Cape and coastal hotspots are expected to enjoy a good year, Seeff expects the Gauteng and inland markets to gain good momentum, and once stock levels start coming down, to see property values in those areas starting to rise meaningfully again.

Sandton set for growth spurt with new twin towers development

Growthpoint Properties, the real estate investment trust (REIT), says that demand for its new luxury residential development in the heart of Sandton has been exceptional, with 60% of units already sold.

The property said that construction of the R2 billion Olympus Sandton twin towers, in partnership with leading luxury residential developer Tricolt, will begin in the coming months, fuelled by strong demand from both individual buyers and investors.

Olympus Sandton will be situated in the mixed-use Sandton Summit precinct, anchored by the Discovery Head Office on the corner of Rivonia Road, where Katherine Street becomes Sandton Drive.

Growthpoint has been rolling out different elements of the Sandton Summit vision for over a decade, and Olympus Sandton is its first development positioned to capture the increased demand for residential property in Sandton Central, it said.

The development will comprise two towers. The first residential tower of 26 storeys will be the first phase of the development along Rivonia Road.

It will include a premium dining experience from Marble Hospitality Group on one of the tower’s upper floors, as well as its extraordinary Pantry convenience retail offering in Grade-A ground floor retail space.

The second phase is a tower of at least 16 storeys, located east of the first.

The sale of the development’s more than 400 residential apartments by Tricolt has commenced and will launch to the public on 27 February 2025, with prices starting from R1.49 million.

Olympus Sandton’s 26-storey tower, although not the tallest building in the area, will become the highest in Sandton, offering unmatched views across Johannesburg and beyond.

Neil Schloss, head of asset management South Africa at Growthpoint Properties, said: “We believe that commencing the Olympus Sandton development is well-timed for the reawakening of the powerhouse that is Sandton Central, and aligned with its accelerated transformation into a vibrant neighbourhood as it evolves with the trend of people wanting to live closer to workplaces and amenities, to offer an exceptional mix of residential, office, retail and other types of properties.”

Timothy Irvine, Growthpoint’s head of asset management for offices, said: “Sandton is experiencing a significant revival. After years of office downsizing, companies are now maintaining their physical presence and even starting to grow it again as return-to-office becomes standard practice.

“Vacancy rates in Growthpoint’s office portfolio are declining nationwide, with Sandton — the country’s cosmopolitan business capital — showing the start of a particularly promising recovery.

“Despite a slow initial post-pandemic resurgence, the district is adapting not only its office spaces to meet growing demand but its entire lifestyle, with more living and gathering spaces.”

The best-known mixed-use asset in Growthpoint’s investment portfolio is the iconic V&A Waterfront, of which Growthpoint is a 50% owner.

Trump’s property confiscation fears in SA supported by FMF

The Free Market Foundation (FMF) says the President of the United States, Donald Trump is right about the risks of expropriation without compensation (EWC).

On Sunday evening, president Trump said on Truth Social that the United States will be cutting off funding to South Africa, pending an investigation into the recently signed Expropriation Act.

“South Africa is confiscating land and treating certain classes of people VERY BADLY (sic). It is a bad situation that the Radical Left Media doesn’t want to so much as mentioned,” he said.

“A massive Human Rights VIOLATION (sic), at a minimum, is happening for all to see. The United States won’t stand for it, we will act. Also, I will be cutting off all future funding to South Africa until a full investigation of this situation has been completed!”

In response, The South African government said it is “looking forward to engaging” with United States of America (US) President Donald Trump’s administration on bilateral relations and other issues.

It said that the new Act states that property may not be expropriated arbitrarily or for a purpose other than a public purpose or in the public interest. The Presidency has also refuted any allegations that land has been confiscated by the state.

The FMF noted with concern the spread of misinformation among South African commentators that the Expropriation Act does not allow for property confiscation, as pointed out by Trump.

The Expropriation Act, the FMF said, does provide for property confiscation, in particular section 12(3) where it allows government to take property for “nil” compensation.

“Section 25 of the Constitution is clear that there must always be payment of an amount of just and equitable compensation,” said FMF head of policy, Martin van Staden. “Concealing the absence of compensation in appeals to ‘nil’ compensation does not cure the Expropriation Act of its confiscatory nature or unconstitutionality.”

He said that the approximately $400 million in foreign aid that South Africa reportedly receives from the US does not compare to the immense damage that property confiscation will do to South Africa’s economy and its people.

“The patriotic thing for South Africans to do is to oppose the government’s attempts to implement expropriation without compensation, not to get upset when foreign actors point it out,” said Van Staden.

“All successful countries follow the model of market-based compensation upon expropriation. This must be the only standard. The developed world’s resistance to the course chosen by the South African government can therefore not shock or surprise us.”

The state’s pursuance of confiscation also threatens the preferential trade access South Africa has to US markets through the African Growth and Opportunity Act (AGOA). South Africa need simply respect its own constitutional values to remain compliant with AGOA.

Property owners in South Africa have never been accorded the respect they are due.

“Prior to 1994, the majority of South Africans were told where they may and may not own property. After 1994, owners were subject to further abuse when the state nationalised privately owned water and mineral rights. Now it has its eyes on all fixed property, primarily agricultural land,” said Van Staden.

“Trump saying that this class of people – property owners – have been treated terribly by the state is therefore also not incorrect.”

Minister of International Relations and Cooperation, Ronald Lamola, has urged Trump’s advisors to deepen their understanding of South Africa’s constitutionally guided and democratic policies as they investigate the Expropriation Act.

Lamola on Monday told SAnews, expropriation laws are not unique to South Africa.

“We trust President Trump’s advisors will make use of the investigative period to attain a thorough understanding of South Africa’s policies within the framework of a constitutional democracy. This approach will promote a well-informed viewpoint that values and recognises our nation’s dedication to democratic ideals and governance.

“It may become clear that our Expropriation Act is not exceptional, as many countries have similar legislation, commonly referred to as eminent domain in the United States and governed by various acts in the United Kingdom,” Lamola said.

8 seaside town hotspots and why more people are moving to them

Smaller coastal towns continue to attract a wide range of home buyers, drawn by their lifestyle, affordability, and accessibility.

These towns offer a quality environment for both retirees and younger families, especially those working from home or seeking to relocate for a better work-life balance.

According to Pam Golding Properties, key factors like efficient local municipalities, proximity to medical facilities, and easy access to major cities or airports also contribute to their appeal.

The realtor highlights the following eight towns that hold appeal for home buyers whether local or international.

In the Western Cape, towns like St Helena Bay and Langebaan have seen significant property market growth. St Helena Bay, with its 18 small bays and scenic beaches, has experienced rising property values, with freehold stands averaging around R599,000, up from R199,000 three years ago.

Langebaan, popular for water sports and nature experiences, has attracted many buyers from Gauteng, Cape Town, and overseas, with prices for beachfront homes ranging from R2.8 million to R17 million.

Meanwhile, Gansbaai, known for its fishing spots and peaceful lifestyle, is also seeing an increase in demand, with homes priced around R2 million to R2.5 million.

The town is expanding with new developments, including a gated village and improved infrastructure, making it an attractive option for semigrants and remote workers.

St Francis Bay, located on the picturesque Eastern Cape coastline, has become a popular destination for young families seeking a permanent residence.

The town’s appeal is growing, bolstered by the local private junior school and Kouga municipality’s ranking as the top in the Eastern Cape.

Property demand remains strong, with entry-level homes selling for around R3 million, while waterfront properties needing renovation start at R6 million. The market is also thriving in the R8 million to R12 million range.

St Francis Bay

St Francis Links plots have seen significant price increases, with entry-level plots rising from R350,000 to R700,000 over the past five years, and prime plots now fetching up to R6 million.

In Kenton on Sea, a coastal town between the Bushmans and Kariega Rivers, the property market is active across various sectors, with prices ranging from R2 million for cottages to R6 million for family homes and R16 million for luxury waterfront properties.

Demand for vacant plots is also high, with erven between 600 and 1,000sqm priced from R300,000 to R2 million.

Buyers are a mix of South Africans, including semigrators, and some overseas investors, many of whom are purchasing for vacation or retirement purposes.

Kenton on Sea

Port Alfred, located on the Sunshine Coast, has seen a rise in interest from semigrators, particularly since the Covid-19 pandemic, as people reassess their living situations and accelerate retirement plans.

Isobel Meyer, area principal at Pam Golding Properties, notes a significant influx of buyers between 18 and 49 years old, including singles, young families, and those seeking investment or relocation opportunities.

The highest demand is for homes priced between R1.5 million and R3 million, with many inquiries coming from Johannesburg, Bloemfontein, KwaZulu-Natal, and international buyers from countries like Germany, France, the UK, and the UAE.

While many buyers seek homes for leisure, there has also been an uptick in relocation inquiries, particularly from South African expats.

Port Alfred

Properties in Port Alfred vary in price depending on location and type. Three- to four-bedroom homes, especially those in security estates, are popular, with turnkey homes ranging from R1.85 million to R3.5 million.

Beachfront and waterfront properties, particularly in the Royal Alfred Marina, are in high demand, with prices for these homes starting at R3.995 million.

Vacant land is also seeing steady sales, with smaller plots available from R200,000 to R250,000 and larger, well-located plots near the beach or river starting at R395,000. However, there are few vacant stands left in the Royal Alfred Marina, with a 1,800sqm plot priced at R4.5 million.

Port Shepstone, located on the KwaZulu-Natal South Coast near the scenic Oribi Gorge, blends small-town charm with modern conveniences.

It’s increasingly popular, particularly among younger buyers, including professionals like doctors and teachers, drawn by its beaches, outdoor activities, and subtropical climate.

The area offers a range of affordable properties, with two-bedroom apartments typically priced between R700,000 and R1 million.

Larger homes, such as three-bedroom houses, start at around R1.2 million, while more spacious properties can go up to R3.5 million, with several homes available in secure estates offering amenities like swimming pools and 24-hour security.

Approximately 70% of property buyers in Port Shepstone seek permanent residences, with the remaining buyers investing in either long-term rentals or holiday properties. The town appeals to a variety of buyers, from young professionals to retirees, thanks to its excellent healthcare, schools, and recreational options.

Nearby Southbroom offers additional attractions, including a 4km beach, golf course, and various local amenities. Beachfront properties in Southbroom range from R2.5 million to R6 million, with freehold homes near the beach reaching up to R15 million.

Southbroom

With a strong sense of community and good infrastructure, both towns provide a secure and peaceful lifestyle, making them attractive destinations for both full-time residents and vacationers.