Open­ing Bell

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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.

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