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However, that scenario is changing with asset managers in SA increasingly looking at growing property portfolios overseas. For example, Cape-based Catalyst Fund Managers plans to launch a new global real estate unit trust fund next month. It's expected to hold around 50% of its assets in US listed real estate investment trusts, with the balance spread over Europe (France and the Netherlands), Britain, Australia, Japan and Hong Kong.
Catalyst's plans follow that of JSE-listed loan stock Redefine's recent decision to offer SA investors some exposure to the British and European property markets via an 18% stake in newly listed Ciref, Corovest International's property fund that made its debut on the London Stock Exchange's Alternative Investment Market (AIM) last month.
Admittedly, Redefine's initial R110m investment in Ciref is marginal relative to its R3,3bn market capitalisation. But it's nevertheless seen as an important first step with further offshore diversification likely. Though to date Redefine is the only JSE-listed property fund to go overseas, others could follow.
Another offshore property vehicle that could open up to SA investors in the next few months is a dual JSE-listing of Corovest's Ciref fund (Corovest is the British property arm of SA-based Coronation Investments & Trading).
Some may question why it's necessary to go offshore at all, particularly as SA's commercial property market is still outperforming that of the rest of the world, according to latest figures released by the International Property Databank.
However, Catalyst Fund Managers MD André Stadler says that diversifying overseas has never made more sense, as the yields (rental income as a percentage of buying price) investors can earn on JSE-listed property funds are no longer significantly higher than those offered on offshore stock markets, with the differential down to roughly 2,5%. Yields on some JSE-funds have dropped to less than 6%, while US- and European-listed property offers an average 3,5% to 4,5%, says Stadler.
He argues that the recent pull back on the JSE has also sent a clear message to investors that listed property prices can't go up indefinitely, signalling that it may be time to take profits offshore.
Kim Zietsman, head of unit trusts at Stanlib, shares Stadler's view. She says there's no doubt that some property investors are now ready to take money off the table with listed property prices running hard for the past three years and the rand being relatively strong.
Redefine CEO Brian Azizollahoff says that though the fund's strategy is not to acquire significant offshore interests, yield compression will no doubt continue to drive the search for growth opportunities overseas.
But it's not only listed property funds and institutions that are going global. Prominent private property owners such as Attfund, with assets of R6,5bn under management, have already invested a "substantial" amount in retail focused listed property funds in Germany (Deutsche Euroshop) and the US (Simon Group) after visiting both markets last year.
Attfund director Louis van der Watt says they were very impressed by the quality of property management of both offshore funds.
Attfund is currently considering further offshore investments in emerging markets, including Eastern Europe, India and China.
PROPERTY SERVICE COMPANIES
EXPORTING EXPERTISE
SOUTH AFRICA'S property service providers are experiencing increasing demand for their management skills overseas, with large players such as Gensec, Old Mutual Properties, Broll and Pace Property Group spreading their wings in various international property markets.
Gensec is in the process of opening offices in Nigeria, Zambia and Ghana. The group is also in talks to enter a partnership with a local service company in Saudi Arabia.
Old Mutual Properties is also involved in joint ventures for property services in Saudi Arabia as well as in India, Mauritius and Angola. Pace recently opened offices in Nigeria and established an association with prominent international service provider Cushman & Wakefield, while Broll has partnered CB Richard Ellis, one of the world's largest property service companies.
Gensec CEO Marna van der Walt says that SA property service providers are in demand in less established property markets, particularly in terms of skills transfer and providing sophisticated management processes and systems.
Van der Walt says that in Middle East countries SA service companies are also seen as a cheaper and more viable alternative to the US and European trading partners with which they traditionally deal.
