Missed the listed property bus? You can still profit in 2026  

Listed property has had a humdinger year. Last month alone, South Africa’s real estate investment trusts (REITs) notched up a gain of 9.1%, following October’s 10.8% jump.  

These are staggeringly impressive numbers set against what you might earn in a money market account – about 7% – over an entire year.  

According to the SA Reit Association, by end-November SA REITs had returned 37.9% year-to-date, surpassing both the broader equity market at 36.2% and bonds at 20.9%.  

Largely, it is because listed property in SA has been stuck in the doldrums for so long that the recovery has been this good.  

“It was off a low base,” says independent analyst Keillen Ndlovu. The kicker though is “a big improvement in earnings growth,” he tells Currency.  

“If you look at 2024, in the property sector average earnings declined by 3% to 4%; in 2025 we’re seeing a nice improvement, where earnings have increased 4% to 6%.”  

The momentum really changed with the formation of the GNU last year. Since then, the sector has produced a return of 84%, says Ian Anderson, head of listed property at Merchant West Investments and compiler of the monthly SA REIT chart book.  

That’s comfortably outstripped any equity market – not just in SA but worldwide. “It’s because the base was so low. These businesses were trading at deep discounts to their net asset values and that’s what we’ve seen unwind for a variety of reasons: no load-shedding, lower interest rates, and an improvement in local property fundamentals,” he says. 

Key to that is almost zero new development other than in pockets like the Western Cape, and rural retail.   

The Boxer factor  

“Shoprite wants to expand, Boxer wants to expand, so developers are happy to develop in rural areas where, at the moment, customers are having to drive 100 kilometres to do their shopping,” he explains. “But other than those areas there’s been no development activity in SA. In fact, the GLA (gross lettable area) of office property in South Africa today is the same as it was in 2019,” says Anderson.   

This has created a welcome level of support for property companies; where they experienced negative reversions of up to 30% on new leases in the wake of Covid, that is now a thing of the past.  

It’s also interesting to see just how well listed property has done when compared to the JSE’s listed retailers, who’ve all had a horrible year. With much of SA’s listed property sector focused on retail, the difference is jarring.  

Asked about this, Anderson says that, for starters, lower interest rates have a “double positive” effect on listed property “because (that) directly affects their cost of capital; average gearing in the sector is anywhere from 35% to 40%”.  

And then there was retail’s higher base, thanks to a rally in 2024 after the formation of the GNU, and investors’ expectations of a two-pot retirement withdrawal bonanza, which never really materialised.  

Finally, there’s the latent kicker from property companies’ heavy, forced spend on alternative energy sources as a matter of survival when load-shedding was it its worst. Now, with loadshedding all but gone, these companies are reaping the benefit of lower electricity bills.   

Solar for the win  

“The returns on those investments are very high,” says Anderson. “One or two companies have been prepared to let us know what those numbers are and their IRRs (internal rates of return) are in excess of 20%. So spending money on solar was better than spending money on new properties.”   

Interestingly, property companies have morphed to being infrastructure companies too. “More and more they are providing some of the utilities and services that go into these buildings and it does seem to be quite a lucrative investment,” says Anderson.  

Merchant West is keen on rural-focused property groups like Fairvest, Dipula and Vukile. And it’s especially keen on the Western Cape; its pick there is Spear. 

Asked whether Gauteng might not be the ultimate contrarian play at this point, with everyone scurrying down South, Anderson agrees that investors should keep an eye on Gauteng office-focused firms.  

“We are getting close to the bottom. Property is a capital cycle play; it’s feast or famine and they are feasting in the Western Cape and that will probably end badly at some point – I just don’t know when that is – but right now Gauteng is at the point of maximum pain and then there will be upside.”  

Generally speaking, Keillen Ndlovu reckons earnings across the sector will probably grow by between 5% and 7% in 2026.   

And any better-than-expected GDP growth will also help. “If you look at most of GDP it’s domestic consumption led, and the property sector has big retail exposure,” Ndlovu points out.  

Extreme valuations  

Anderson, in fact, hopes for more conservative growth in the new year “otherwise we’re going to go back to those extreme valuations that we saw at the end of 2017,” he fears.  

“Investors should expect the dividend yield which is around 7% to 8% and they should expect earnings of 6% to 8%, so you’re looking at a 12% to 15% rally for next year,” he concludes.  

Not exactly mind-blowing, but hardly to be sniffed at, either.

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