Foreigners shy away from listed property

Commercial property needs to be taken out of the hands of government, private investors and listed - Nedbank property finance.

Listed properties make up less than a third of South Africa's total commercial properties and it is not enough to attract foreigners to invest in the property market.

This is according to Norbert Sasse, Growthpoint CEO, speaking at the South African Property Owners Association (Sapoa) annual convention.

He explained that little research had been done on the total number and value of the country's commercial properties but estimated that government, private individuals and corporates owned 65-75%.

Property experts reckon the total value of these non-listed commercial properties is between R800bn and R100bn - approximately the same value as the total market cap of the listed property sector.

Corporates owning some of South Africa's most valuable commercial properties include AECI, Sun International, Imperial and Bidvest.

Total returns of listed property have been phenomenal over the past few years and foreign shareholding has increased slightly, but there is still huge potential for more growth, reckons Sasse.

He explained that the foreign shareholding in Growthpoint had increased from just below 2% to nearly 5% in the last eighteen months.

"It has more than doubled but it is still not enough," added Sasse.

There is not going to be a big inflow of foreign investment in listed property - the sector is just too small, reckoned Frank Berkeley, Nedbank's MD of property finance.

He maintained that consolidation in the listed property sector wouldn't help. Rather, the property loan stock and unit trust funds need to grow.

We need to take commercial property out of the hands of government and private investors and list it, said Berkeley.

Sasse also reckoned that the introduction of a real estate investment trust (Reit) system in SA would make the listed property sector more attractive.

Property players say the property loan stock and property unit trust structures are alien to foreign investors and discourage them from buying listed property in SA.

The listed property market needs to grow substantially and align itself internationally to be able to participate in global investment," reckoned Berkeley.

Article by: Gaylyn Wingate-Pearse -