Investment in SA real estate a good bet, says veteran

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Many South African investors have chosen offshore property stocks over local stocks during the past 18 months, as they seek hedges against a weak rand, and are also attracted to companies operating in faster growing economies than SA.

Berkeley was the keynote speaker at a real estate industry update presentation held by advisory and auditor firm KPMG on Wednesday, 18 May. He is recently retired, having spent more than 30 years in real estate.

"If I think of African property markets, SA is currently the best and safest bet. While people may worry about policy certainty, corruption, and political stability, SA is actually quite stable.

"Our financial systems are reliable, we can get money in and out of the country and so on. So, while there are opportunities elsewhere in Africa ... right now I feel there are many opportunities in SA," he said.

Berkeley said there was strong demand for residential assets in Cape Town that offered one such opportunity. "More people are moving to Cape Town than ever before. There have been spikes in the number of people looking to retire there and also student accommodation is in tremendous demand.

"Residential property has become a popular investment for listed funds and I can see a lot of activity happening in Cape Town," he said.

Berkeley said, however, investors needed to be circumspect when it came to choosing South African property stocks.

This was because some stocks were far overvalued relative to others. "We've found that yields are too close for many property firms, as investors have not looked enough at the underlying assets and quality of the management at various funds and then valued stocks inaccurately," he said.

Berkeley said a number of funds were looking overseas for opportunities, but they did not necessarily know enough about those markets.

In a separate interview, Arrowhead Properties chief financial officer Imraan Suleman said investors needed to note that many offshore deals would initially be earnings accretive for South African funds, but the funds would then have to look for more acquisitions to keep up their enhanced distribution payouts.

Source: Business Day