The latest figures for March underline how the Iran war has derailed the two-year rally by property stocks. As Brent crude surged above $100 a barrel, the rand tumbled and the Reserve Bank halted its rate-cutting cycle, the JSE’s all property index slumped 12%.
That dragged the sector’s year-to-date (first quarter) return into negative territory at -5.3%. This is a disappointing outcome for property punters who only recently joined the fray and were hoping to cash in on a recovery that still seemed to have plenty of legs.
Unsurprisingly, listed property was the hardest hit of all asset classes, given the sector’s sensitivity to interest rate movements. The all share index is down a relatively mild 0.6% in Q1, while the all bond index delivered -3.4%. Cash is still positive at 1.7%.
The reversal of fortunes for the real estate investment trust (Reit) sector comes after a robust recovery in 2024 and 2025 that delivered an impressive 68.5% cumulative total return. Several counters were still trading below pre-pandemic peaks and at double-digit discounts to NAV by the end of February, though, suggesting there was still upside in the offering. And then the US-Israel onslaught on Iran began.
However, not all counters have been punished to the same extent. Figures from equity research firm Golden Section Capital show there was a yawning 318% gap between the best and worst performers in March: micro-cap Visual International Holdings — a property developer that was trading at 1c in early March — notched up a total return of 300%, while government-tenanted office play Delta Property Fund was down 18%.
Other stocks that took a big hit alongside Delta include South African Corporate Real Estate (-18%), Hyprop Investments (-17%), Fairvest B (-15%), Redefine Properties (-14%) and Growthpoint Properties (-14%). March’s losers had been among the sector’s biggest winners over the preceding year, so their disproportionately large correction shouldn’t come as a surprise.
The counters that fared best in March, besides Visual International and township and rural mall owner Exemplar REITail, were mostly small caps such as Oasis Crescent Property Fund, Balwin Properties and Octodec Investments.
Still, the larger and more liquid players — especially those that generate most of their income in South Africa — delivered decent 12-month returns to the end of March. At least 16 of 35 counters posted total returns exceeding 30% (see table). The one-year rankings, which exclude a handful of micro-caps and thinly traded stocks, were topped by Octodec and Balwin, both exposed to residential property. Visual International, Acsion, Redefine Properties, Resilient Reit, Fairvest B, Emira Property Fund, Spear Reit and Dipula Properties round out the top 10.
The key question for investors is whether the sector will shrug off March’s pullback once the Iran conflict is contained, or if this marks the start of a deeper decline.
Balance sheet quality and debt profiles are now more important than at any other point in the past two years
— Garreth Elston
Golden Section Capital MD Garreth Elston believes there’s no reason for panic just yet. “March’s sell-off reflects macro uncertainty rather than a collapse in property fundamentals or company-specific deterioration.”
On whether the sector’s hard-won gains can survive elevated inflation, stalled monetary easing, currency weakness and slowing growth, he says: “Our conclusion is cautious but not pessimistic: the underlying fundamentals that drove the recovery remain intact, but the risk-reward [ratio] has deteriorated meaningfully.”
Elston urges investors to become more selective, adding that “balance sheet quality and debt profiles are now more important than at any other point in the past two years”.
While most Reits have reduced debt and strengthened balance sheets, he notes that interest cover ratios and refinancing risk have again come under the spotlight — particularly for counters with near-term maturities.
Elston says the two-year rerating was driven largely by falling rates and lower refinancing pressure, but a pause or reversal in rate cuts weakens earnings tailwinds. Potential stagflation — inflation spiking amid weaker GDP growth — could also weigh on returns.
Still, property portfolios remain in reasonable shape, with vacancies down from 2022/2023 highs. Rentals are also starting to grow again in logistics, industrial and defensively positioned retail, supporting earnings and dividends.
Performance for the rest of 2026 will depend on whether the Iran conflict is resolved before high oil prices become entrenched — and how soon the Bank resumes rate cuts. “A sustained oil shock that forces a tightening of the rate cycle would represent a materially different outlook,” says Elston.
But some property stocks are better protected against elevated rates than others. Elston believes companies earning most of their income in South Africa, with long lease tenures and high levels of fixed or hedged debt, are least at risk. He adds that township and convenience-based retail centres should be more resilient than glitzy suburban malls due to their exposure to nondiscretionary spending. Office portfolios are likely to remain under pressure.
Independent analyst Keillen Ndlovu takes a similar view, saying the sector is now in a much stronger position to withstand external shocks than before the pandemic. The good news, he says, is that recent results and updates confirm most companies are on track to deliver inflation-beating earnings and dividend growth this year. That follows a multiyear decline in profits.
Ndlovu expects 6%-7% average income growth, with retail-focused stocks leading the pack. Heriot, Exemplar, Attacq and Hyprop Investments are expected to deliver double-digit earnings growth for 2026, followed by Fortress, Resilient Reit, Vukile Property Fund and Fairvest B with 9%-11%.
Counters set to lag with low single-digit growth include Octodec, Burstone and Emira. SA Corporate Real Estate has withdrawn guidance following the outbreak of the Iran war, while Delta, Accelerate Property Fund and Texton Property remain tight-lipped about their prospects. None of them have resumed dividends since the pandemic.
Still, Ndlovu notes loan-to-value ratios have fallen to a comfortable 37% on average and interest cover ratios have improved to 2.7 times. The latter measures a company’s ability to meet interest payments out of earnings. “This means it would take a meaningful increase in interest rates, decline in earnings and fall in property valuations to breach bank covenants.”
He adds: “It’s difficult to predict how long the Middle East conflict will last and its exact impact on share prices and earnings growth. But it’s important that investors take a longer-term view to ride through current volatility and uncertainty.”
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