Offshore property stocks lose
It is remarkable how rapidly the fortunes of some offshore property stocks have reversed. A year ago, market darlings such as London-focused Capital & Counties Properties (Capco) and Romanian-focused New Europe Property Investments (Nepi) were among the JSE’s top performing stocks. But Brexit, inflationary concerns in the eurozone and rand strength have dimmed investor sentiment towards offshore offerings.
Capco’s share price is down 47% in the first seven months of 2016 while UK mall owner Intu Properties has lost 23%. Nepi’s year-to-date return is also negative though at a more palatable 5%. Meanwhile, SA-focused property stocks such as Hyprop Investments, Redefine Properties and SA Corporate Real Estate Fund are the sector’s top performers year-to-date with total returns of 34%, 28% and 27% respectively, according to latest figures from Catalyst Fund Managers.
Top estates for the wealthy
Insurance tycoon Douw Steyn’s R6bn lifestyle development Steyn City, the new mixed-use enclave sandwiched between affluent golf estate Dainfern and low-income suburb Diepsloot on the outskirts of Johannesburg’s Fourways, now ranks as one of SA’s top 10 residential estates.
New World Wealth’s estate ratings for 2016, released earlier this month, place Steyn City as the fourth-best residential estate in SA. It’s Steyn City’s first appearance in the survey.
The top three spots went to Val de Vie in Paarl in the Cape Winelands, followed by Zimbali near Ballito, north of Durban, and Fancourt in George on the Garden Route.
The ratings criteria include security; lifestyle amenities; quality and design of houses; space in terms of stand sizes and placing of properties; views and scenery; appeal to wealthy buyers; and resale and capital growth potential. Other sought-after estates on New World Wealth’s top 10 rating include Pezula in Knysna; Whale Rock Ridge in Plettenberg Bay; De Zalze in Stellenbosch; Atlantic Beach between Blouberg and Melkbosstrand in Cape Town; Highland Gate near Dullstroom; and Arabella on the Bot River Lagoon in Kleinmond, near Hermanus.
Steyn City made media headlines two years ago when it was revealed that Steyn, the billionaire founder of Auto & General, built a lavish Tuscan mansion at Steyn City at a cost of R250m, which at the time was believed to be the most expensive house ever completed in SA. The estate was officially launched in March last year. Property sales of more than R1.5bn have since been concluded.
The 800 ha estate has already set a new benchmark for rental values in Gauteng. One of Steyn City’s original show houses, a fully furnished, modern, five-bedroom home of 750 m² on a 1,500 m² stand with all the bells and whistles, has fetched a staggering R130,000/month with two more properties let to multinational corporates at more than R100,000/month.
New World Wealth’s Andrew Amoils says Steyn City is the largest estate in the country in terms of land size. It includes a mix of apartments and standalone houses as well as an equestrian centre, a Jack Nicklaus designed 18-hole championship golf course and club house and more than 250 ha of landscaped parkland.
The estate is still at an early development stage, with plans to add two private schools, a convenience shopping centre and offices. “The communal areas, vegetation and parklands on the estate are particularly impressive, as is the bird life,” says Amoils.
Sub-Saharan Africa transparency
Currency and liquidity risk remains a concern for investors wanting to cash in on real estate opportunities in sub-Saharan Africa. The big swings in the exchange rate of a number of local African currencies versus the US dollar over the past 12-18 months, has contributed to sub-Saharan Africa still lagging in the global transparency ratings, according to JLL and LaSalle Investment Management.
According to the JLL 2016 Global Real Estate Transparency Index (Greti) for sub-Saharan Africa, a number of African countries are still some distance from competing equally with their counterparts in the EMEA region despite some tangible advancements in transparency in recent years.
“There is significant uncertainty, especially in Nigeria, Angola and Mozambique and to a lesser extent Zambia, owing to an acute shortage of US dollars and lack of direction on monetary and central bank policies, which compounds transparency risks,” says JLL SA MD Craig Hean.
Apart from currency and liquidity issues, Hean says the region has also had a slight deterioration in the legislative and operating environment, with two countries — SA and Mozambique — registering a noteworthy decline in overall score. “Sub-Saharan Africa continues to make advances in real estate transparency, but progress has been patchy with limited development in regulatory and legal reforms and enforcement.”
Hean refers to high-profile failures of regulation such as building collapses, which have served to highlight that a lack of regulatory enforcement can have devastating consequences. However, the greater penetration by international real estate consultancies that are promoting professional standards and availability of market data has already begun to improve transparency in some areas.
Hean says six markets (Botswana, Zambia, Ethiopia, Nigeria, Angola and Ghana) have recorded reasonable progress in transparency since the last index was published in 2014.
Steyn City. Property sales of more than R1.5bn have already been concluded.