Norbert Sasse, CEO of sector heavyweight Growthpoint Properties (who recently went on an international road show with fellow listed counters ApexHi Properties and SA Corporate Real Estate Fund), says the level of interest overseas in SA listed property is "unprecedented".

Growthpoint management had back-to-back meetings with 32 different emerging market real estate investors at the four-day investor road show organised by stockbrokers Macquarie First South Securities in London and New York. Sasse says it's encouraging that a number of those fund managers have already dipped their toes into SA and are keen to expand their exposure to the sector.

He says diversification has paid off handsomely for investors who have already taken the plunge into SA, as most have earned far better returns on SA listed property this year than on their real estate holdings in the US, Britain and Europe. "Offshore asset managers have seen US dollar returns of around 20% from their SA listed property investments in the year to date, compared with negative growth in many other parts of the world."

Sasse says SA's outperformance comes mainly on the back of a stronger rand and relative immunity to ongoing fears regarding the global credit crunch. Interestingly, Sasse says most offshore investors are chasing SA property funds with a higher-risk profile that offer potentially higher rewards - for example, counters that offer superior upside through large development pipelines. Over the past 18 months Growthpoint's foreign shareholding has already more than doubled to around 5%. Sasse says there's plenty of room for further growth, given that the overseas stake in JSE general equity shares is at around the 20% to 30% level.

Macquarie First South Securities property analyst Leon Allison says there's a good chance that the SA listed property index will be included in the prestigious FTSE EPRA/NAREIT global real estate index in first quarter 2008, a move that will further raise the profile of SA listed property among European fund managers.

However, size still remains an issue. Brian Azizollahoff, CEO of Redefine Income Fund, says if SA funds were bigger and more liquid they could attract far more offshore money than is currently the case. The larger pension fund managers with multi-billion US dollar portfolios under management are generally not inclined to even look at funds that don't have market caps of at least R10bn. Currently, only Growthpoint (R18bn) and ApexHi Properties (R11,5bn) qualify. However, Azizollahoff says the sector's ongoing consolidation drive could soon see a few other funds also approach that level.