Demand for residential properties attracting investors

Posted On Thursday, 14 November 2013 08:16 Published by
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Residential property in an array of forms including student housing is in such high demand that investors who have not dabbled in it before‚ are chasing it.

Jay PadayatchiThis is according to Jay Padayatchi‚ director at Meago Asset Management‚ who was interviewed by Business Day this week. Meago is a specialist property equity fund manager. Listed residential property has not yet gained traction in South Africa. according to Padayatchi‚ but those in the market were recognising its potential.

Demand is growing and there just is not enough quality stock. This can be seen from how well-received the residential property purchase by Arrowhead Properties was. If you just look at how private equity of all people are buying into residential student living‚ you get to understand how intense the demand is‚" Padayatchi said. South Africa's listed property has only 1% residential exposure by value‚ according to investment bank Stanlib‚ compared with about 11% in developed markets and 15% in emerging markets.

Octodec Investments and Premium Properties are the main companies with residential property exposure. Octodec has 8% residential exposure‚ while its sister company‚ Premium‚ has 30% exposure. These portfolios are both managed by City Property and are the JSE's only property companies with significant residential components. Growthpoint Properties‚ which is the largest South African listed property company‚ with a market capitalisation of about R48.7bn‚ has 43 residential properties. These are flats in the Victoria and Alfred Waterfront. JSE-listed group Arrowhead last month announced its first foray into residential property‚ which it hoped would be a catalyst for future deals in that sector. It agreed to buy a residential property portfolio from Jika Properties for R406m. The portfolio will receive a guaranteed return of no less than 10% in the first year and 10.8% in the second year. Arrowhead is set to release its annual results on Wednesday.

Last modified on Thursday, 14 November 2013 08:42

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