BUSINESS OF REAL ESTATE

AN OVERSUPPLY OF SPACE

FAIRTREE Global Real Estate prescient fund co-portfolio manager Ryan Cloete has said that he believed its market fundamentals were looking weak for the local listed real estate sector. Cloete said yesterday that there was an oversupply of space in most sub-sectors, combined with a weak demand outlook on the back of a tough South African macroeconomic backdrop. “This makes it unlikely for South African real estate to return to its glory days any time soon,” said Cloete. He said investors should rather consider global real estate, which he said exhibits favourable investment characteristics, and stronger fundamentals. Global real estate had outperformed SA equities, SA bonds, and SA listed property over a 1, 5, 7 and 10-year basis, he said. Through global real estate, investors were exposed to many developed market economies, which were growing at healthy levels. Global real estate investors had also consistently received a high dividend yield from this asset class. “The rand has depreciated against developed market currencies by on average 4 to 6 percent per year over 20 years,” Cloete said. “This means South African investors in global real estate have made 4 to 6 percent return every year on currency alone, over and above the US dollar product return. “With good active management, investors can continue to gain exposure to higher growth regions, and stocks within those regions, which are independent of the weak SA economic and political environment.” |