Asset managers soon to be on heights as they are ready to be benefitted from the growing residential property demand from various institutional investors, by launching funds investing completely or partially in the asset class.
The residential property sector including the student housing is in great demand. The situation is such that the investors who were not at all interested for this property before, including the equity groups are now looking for it.
Jay Padayatchi, director at Meago Asset Manager said that, listed residential property is not yet that resistant in South Africa like what it should be, but those which were in the market were showing their strength. And Meago is a specialist property equity fund manager.
He further said that “ The demand is increasing and in context to that there is not enough quality stock. This can be well understood from how Arrowhead Properties had well-received the residential property purchase. Simply looking at how people are buying property in residential student living, you will clearly understand how strong the demand is.”
Considering the residential exposure of the listed property by value of South Africa, it is only 1% compared to developing markets in which it is 11% and 15% in the emerging markets - according to the investment bank Stanlib.
The main companies with the residential property exposure are Octodec Investments and Premium properties. Octodec has 8% exposure while Premium has 30% exposure. These are the only companies of JSE with proper residential components and their portfolios are managed by City Property.
South Africa’s largest listed property company Growthpoint Properties, has 43 residential properties with a market capitalisation of around R48.7bn. The property includes flats in Victoria and Alfred Waterfront.
In the last month, one of the JSE listed group Arrowhead had announced for its first attempt into the residential property, which is expected to play the role of a motivator for future deals in that sector.
It is ready to buy a residential portfolio from Jika Properties priced for R406m. The portfolio will receive a guaranteed returns of no less than 10% in the first year and 10.8% in the next.
