SA REITs expected to deliver positive distributable income growth for the first time in three years

Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments, as well as compiler of the SA REIT Association’s monthly Chart Book, said the South African Real EstateInvestment Trust (SA REIT) sector is poised to see positive distributable income growth for the first time in three years.
 
However, interest rates are unlikely to fall as swiftly or significantly as anticipated. At the same time, the signing of the Expropriation Bill into law by President Cyril Ramaphosa has added uncertainty for some investors.
 
“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.

Anderson said 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 is expected to remain elevated for longer, which presents challenges for REITs and other interest-rate-sensitive sectors. January’s share price performance underscored investor concerns.

At their first policy meeting of the year, the US Federal Reserve kept interest rates unchanged, marking the first time since July 2024 that no rate cuts were implemented. This decision contributed to higher US bond yields in January. Meanwhile, the South African Reserve Bank’s Monetary Policy Committee did reduce interest rates by 25 basis points, although the decision wasn’t unanimous. Future rate cuts will depend on the outlook for global inflation and the scale of tariffs introduced by President Trump.
 
Against this backdrop, South African REITs saw a 3.6% decline in January, underperforming the broader equity market, which rose 2.3%, driven by strong returns from the precious metals sector and the bond market, which posted a modest 0.4% gain due to attractive real yields in South Africa.
 
Anderson said it is not unusual for South African REITs to start the year with negative returns. Since 2020, they have only delivered a positive return in January once, in 2024.

This year, 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.