Is it time to re-enter Britain?

Uk-listed property has outperformed other global regions in the year to date but the rebound may be tentative

It seems that appetite for UK property stocks is finally on the mend after a multiyear decline on the back of continuing Brexit uncertainty, a sluggish economy and weak retail spending.

The London Stock Exchange’s real estate sector has delivered a total return of 15.4% (in rand terms) year to date, pipping other global regions to the post, according to the latest figures from Anchor Stockbrokers. The next best performer was the US with 15.1%, followed by Europe (9.6%) and Australia (8.5%). SA property stocks have had a total return of only 5.3% year to date. Despite the recent uptick in Uk-listed property prices, many are still trading at discounts to NAV of 20%-plus, which raises the question: should SA investors start increasing their allocations to the region?

The JSE offers 10 or so property counters that offer partial or 100% exposure to the UK. These include Capital & Counties Properties, Intu Properties, Hammerson, RDI Reit, Tradehold, Stenprop, Atlantic Leaf Properties and Capital & Regional.

Despite the apparent value proposition on offer, most SA analysts remain cautious given the lingering uncertainty about if, when and how Brexit will play out.

The general view is that investors need to carefully assess the prospects of individual counters and the specific sectors to which they are exposed.

“There is substantial value to be had on an individual stock level. But it is now all about stock picking — irrespective of Brexit uncertainty,” says Craig Smith, head of real estate research at Anchor Stockbrokers.

The performance of different Jse-listed counters year to date suggests that the rebound has been patchy. In fact, the gap between the best- and worst-performing Uk-focused property stock is a hefty 36% — Stenprop’s share price is up 17% against Capital & Regional’s decline of 19% (see table).

Stenprop owns mostly logistics, industrial and office properties, while Capital & Regional is exposed to the retail sector. Logistics and industrial-focused Atlantic Leaf Properties, which last