Listed Property Makes a Comeback, but What Now?

Listed property as an asset class (see “How to invest in property without becoming a landlord”) sits somewhere between bonds and shares in its market behaviour: market prices can be volatile, but distributions to investors from rental income are normally relatively consistent and stable. Thus, investors, particularly those invested for an income, need to look beyond the often volatile share prices of real estate investment trusts (Reits) and property companies listed on the JSE, because they tell only half the story.

Two JSE indices that property investors may be interested in are: 

• The JSE/FTSE SA Listed Property Index: commonly referred to as the Sapy, this comprises the top 20 property firms (including but not confined to Reits) by market capitalisation on the JSE.

• The JSE/FTSE SA Reit Index: this consists of all Reits listed on the exchange, also weighted by market capitalisation, with no single constituent comprising more than 15% of the index.

Note that although these firms are listed on the JSE, many of them have sizeable offshore property holdings and are therefore affected by movements in the global property market, as well as by rand weakness or strength.

Looking at performance by market capitalisation (total number of shares multiplied by the share price), the indices have shown high volatility, especially since the 2020 Covid-19 pandemic, when they fell precipitously.

The Sapy enjoyed a period of strong growth from a low in 2009 caused by the global financial crisis through to the end of 2017, rising 130% from about 290 points to about 670 points. In 2018, according to news reports, a prominent property group, Resilient, was at the centre of a scandal involving allegations of share price manipulation and artificial inflation of net asset values among its subsidiaries. Although the directors were subsequently cleared of wrongdoing, the scandal knocked an estimated R100 billion off the value of the listed property market.

The market tottered for a couple of years and then succumbed to the pandemic, which saw the Sapy plummet to about 200 points by October 2020 (more than 70% down from its 2017 high). Commercial property, especially office space, was badly affected as “work from home” became the norm.

In the subsequent years, as life slowly returned to normal and the South African economy steadied, and then as confidence in the economy rose with the installation of the Government of National Unity and the cessation of loadshedding, the property market rebounded, not to previous levels, but on a more secure foundation. The year 2024 proved a particularly good year for the sector. 

In his October 2024 article “What’s next for South Africa’s listed property sector”, M&G’s property portfolio manager, Rahgib Davids, divided listed property’s recent history into three periods: a period of greed, ending on the market high at the end of 2017; a period of fear, from 2018 to late-2023; and a period of hope, from late-2023 onwards.

Davids wrote: “The comeback rally began in October 2023, sparked by optimism at the prospect of an interest rate cutting cycle and slowing inflation. This was further bolstered by the end of loadshedding and a market-friendly election outcome in South Africa, leading to [lower] SA bond yields. This shift reflected a reduced SA risk premium and a revival of positive sentiment, which extended to SA listed property, prompting its re-rating accordingly. We refer to this as the period of “hope”, as we believe the improved sentiment is justified by the fact that listed property has fundamentally transformed itself and is set to benefit from anticipated tailwinds that will drive sustainable earnings growth.”

Davids said that, to survive the period of fear, the sector underwent a “drastic transformation”, which entailed debt reduction, improving the quality of earnings, and boosted resilience, including “significant investment into solar power and water-supply resilience to bolster self-sufficiency in the face of poor public service delivery”. 

While recent geopolitical events have disrupted financial markets generally, the mood in the sector remains one of cautious optimism. A recent article, “SA Reits pull back 12.3% in March”, by the SA Reit Association maintains that sector fundamentals are “holding firm”.

It says Reits gave back their early-year gains in March, declining 12.3% “as the geopolitical conflict drove oil prices higher, weakened the rand and reignited inflation concerns across emerging markets. The pullback left SA Reits down 4.3% for the first quarter of 2026.

Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments, notes: “The pullback in March was a valuation reset driven by geopolitical risk, not a deterioration in underlying fundamentals. Rolling 12-month distribution growth improved to 9.43% and 12-month total returns remain strong across much of the sector. This looks more like a period of market de-risking than a reflection of weakening company performance.”

Joanne Solomon, Chief Executive Officer of the SA Reit Association, says the sector’s resilience should not be underestimated despite the turbulence. “The geopolitical conflict has introduced significant short-term uncertainty for all asset classes, not just Reits. However, our sector enters this period of volatility from a position of strength, with improving distribution growth, healthier balance sheets and a broadening investable universe. The fundamentals that drove the sector’s remarkable recovery over the past two years remain firmly in place.”