Anyone can invest in a SA REIT entity. Investment in the SA REIT asset class is typically suited for investors looking for stable growing income returns over the long term. It is a powerful diversification tool in a diversified investment portfolio and is suitable for local and international:
Investing in a SA REIT may be easier than you think. The JSE says that the minimum investment in a SA REIT is one share. Depending on the SA REIT, this could then be below R100. Investments can be made directly in a SA REIT via a securities account (online or using a stockbroker), collective investment scheme (Unit Trust) or Retirement Annuity that invests in SA REITs. The SA REIT Index can also be your investment to obtain exposure to the whole sector.
Shareholders of a SA REIT company won’t pay Securities Transfer Tax (STT) on buying or selling SA REIT shares. South African investors will receive gross distributions from a SA REIT entity, without the 15% dividends tax being levied against the distribution. But investors will have to pay tax on the distributions at their applicable marginal income tax rate when they include it in their taxable income. Foreign shareholders of SA REITs will be levied a dividend withholding tax from 1 January 2014 – the current rate is 15% or the applicable double tax agreement rate could apply.
While SA REITs only became a reality on 1 May 2013, the listed property asset class has a rich history in South Africa.
The sector dates back to 1969, when the first two property funds listed on the JSE and was established to allow individual and institutional investors to invest in a diversified portfolio of investment grade properties on the same basis as if they had bought the properties directly.
The growing South African listed property sector was represented by two associations – first, from 1984 the Association of Property Unit Trusts, A PUT. Then, joining it from 2004 the Property Loan Stock Association, PLSA.
These two representative bodies worked together, and spearheaded the drive to introduce a best-of-breed REIT dispensation for South Africa. To formulate and steer the process, a working group was formed comprising representatives of the PLSA, invited participants from unlisted property loan stock companies, the South African Property Owners Association (SAPOA) and the Association of Property Unit Trusts (APUT).
It engaged stakeholder such as National Treasury and SARS, the JSE and FSB as vital contributors in aligning the new structure with easily recognisable and understandable existing global standards.
Instrumental in making the SA REIT sector what it is today – one of the most active and innovative sectors on the JSE – the two associations joined to become the SA REIT Association with the introduction of the SA REIT in May 2013, which placed the listed property sector on par with similar investments around the globe. The SA REIT ensures that the vehicle for the monetising and listing of property assets in South Africa is consistent with REIT structures internationally, making the sector more attractive for international investors.
The South African listed property sector has seen market capitalisation rise from below R5 billion in the early 1990s to approximately R6 billion in 2000, then soar to R24 billion in 2004, R200 billion in 2012 and R380 billion at the end of 2016.
In addition, volume traded in this sector has risen from about R600 million in 1995 to about R6 billion in 2004 and R165 billion in 2016.
Today there are 27 SA REITs for investors to choose from. And, an increasing number of these have diversified into property holdings in international markets.
Continuing its impressive track record of driving best practice for the sector, the first edition of the SA REIT Best Practice Recommendations for the sector were published by the SA REIT Association making it even easier for analysis and comparison of different SA REIT counters, and providing investors in greater transparency, consistency and comparability. This also plays an important role in attracting global flows of capital into the South African listed property sector.