Does the listed property sector’s recovery still have legs? That’s no doubt the key question on investors’ minds given the strong rally in share prices — especially those of South Africa-focused stocks — in 2025.
It appears that the run isn’t over just yet, given that several local real estate investment trusts (Reits) were still hitting fresh 12-month highs last week, including Growthpoint Properties, Vukile Property Fund, Redefine Properties and Hyprop Investments. The JSE’s all property index is, in fact, now trading at its highest level in 6½ years as income chasers continue to climb back into real estate stocks.
Last year’s juicy 31% total return exceeded 2024’s gains of 29%. Still, listed property lagged the all share index’s hefty 42% total return in 2025. But listed property trumped general equities over three and five years (see graph).
That’s quite a comeback for an asset class that not so long ago was dismissed by equity fund managers after pandemic-induced woes, load-shedding and higher-for-longer interest rates reduced earnings and forced management teams to slash or suspend dividends.
Last year’s average return, however, masks the sizeable differential among individual property stocks, which comes to more than 60% for the best performer — township and rural mall owner Fairvest (B shares) — and the worst performer — Schroder European Reit, which owns a small portfolio of mostly industrial/business parks in the UK (see table).
Figures from Anchor Stockbrokers show that 2025’s top eight property stocks are all local Reits, while the bottom eight are all offshore stocks — bar Burstone Group (formerly known as Investec Property Fund). Burstone, however, holds nearly 70% of its assets offshore these days.
The figures exclude smaller, illiquid and formerly distressed domestic property counters, some of which also bounced back strongly, with Delta Properties, Putprop, Acsion and Texton Property Fund surging more than 50% in 2025.
If offshore stocks are stripped out, local Reits delivered a hefty 36% total return in 2024 and 39% in 2025, according to the South African Reit Association. That pushed the market cap of the 23 local counters that make up the domestic Reit sector to beyond R300bn late last year, up from about R180bn in early 2023 and its highest level since 2018.
The sharp rerating comes on the back of improved investor sentiment, buoyed by better than expected financial results and a resumption of dividend growth. The latter has no doubt signalled to investors that the worst is over. Lower inflation, the start of the rate-cutting cycle, improved political stability and sentiment and the country’s removal from the Financial Action Task Force’s greylist all helped to lure investors back to South Africa Inc Reits. Most domestic stocks also saw an uptick in demand for retail, industrial and even office space last year, which is starting to translate to lower vacancies and higher rentals.
If supportive conditions remain [lower inflation and easing rates], there is room for further gains
— Garreth Elston
In addition, management teams used the post-pandemic downturn to sell underperforming assets and pay down debt, which has gone a long way towards strengthening balance sheets. Independent property analyst Keillen Ndlovu points out that loan-to-value ratios have come down to an average of 36.5% from a peak of about 44% during Covid. That has allowed many to start bulking up portfolios again, turning the sector into a net buyer as opposed to a net seller of assets. Ndlovu says property stocks raised R11.4bn in new equity in 2025, mainly to cash in on acquisitive growth opportunities, a trend he believes should continue in 2026 given closing discounts to NAV. That discount now stands at about 7% for the sector, which allows equity raises to be less dilutive than a year or two ago, when property stocks were typically still trading at discounts of 30%-50%.
Still, to what extent can the sector’s new-found momentum be sustained? Analysts agree that there’s further upside left, provided there are no unexpected local and global economic shocks or an abrupt end to the Reserve Bank’s rate-cutting cycle. Ndlovu says that though there could be some profit-taking this year, the investment case for listed property remains attractive. The sector offers a one-year forward yield (income return) of a decent 7.5%-8%, while earnings growth is expected to accelerate to 5%-7%, “with possible upside surprises”. That’s up from 4%-6% growth in 2025 and a stark improvement from 2024, when earnings declined by an average of 3%-4%.
In fact, some counters, such as Hyprop, Resilient Reit, Vukile and Fairvest B, expect almost equally strong or double-digit income growth for the 2026 financial year. In contrast, below-average earnings growth (0%-4%) is expected for Octodec Investments, Burstone, Emira Property Fund and Nepi Rockcastle. Accelerate, Delta, Exemplar and Texton have opted not to provide any guidance to investors.
While Garreth Elston, MD of equity research firm Golden Section Capital, expects a more “measured” performance from property stocks this year, he says the sector appears to be entering 2026 with “genuine traction” backed by an improving economy.
“The outsized gains achieved by South African Reits compared with offshore Reit markets, many of which retreated last year, indicate a broad rerating of the sector rather than a short-term bounce,” he says. “If supportive conditions remain [namely lower inflation and easing rates], there is room for further gains — likely not another 30% surge, though a respectable 15%-20% total return is achievable.”
Elston reckons that even after last year’s big rally, domestic Reit valuations are not yet stretched. Most still offer a discount to NAV and dividend yields in the high single digits. Elston says the outperformance of local Reits hasn’t gone unnoticed by foreigners, which could prompt an inflow of international investors to the sector looking for yield and growth — “if the rand stays stable”.
Ian Anderson, head of listed property at Merchant West Investments, is equally bullish about the outlook for listed property. Given how undervalued local Reits were two to three years ago, there’s further room for catch-up, he says. He expects more investors to rediscover the diversification role of Reits in multi-asset portfolios, which should support capital inflows into listed property.
Anderson believes property fundamentals and operating metrics should continue to improve, which will likely see a further drop in vacancy rates and stronger rental growth. The upshot is that most Reits are likely to report accelerated earnings and dividend growth over the next few months. In fact, Anderson expects average annual income growth of 6%-8% and an annual total return of 12%-15% from the South African Reits for at least the next three years. He adds: “The sector’s momentum remains firmly intact.”
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