An Investigation into the Relatively Low Uptake of Residential Stock within South African Real Estate Investmennt Trusts

Abstract

Purpose: The purpose of the research was to determine the reasons for the low uptake of residential stock within South African (SA) Real Estate Investment Trusts (REITs). Residential property hardly features within SA REITs. There is only one SA REIT that specialises in residential property, while the majority of SA REITs hold diversified portfolios comprising office, retail and industrial stock.Method: Semi-structured interviews were conducted with a fund management company that specialises in the listed property sector. This was followed semi-structured interviews with upper management of four SA REITs.Findings: The data was categorised according to the nature of residential real estate, financial performance of residential real estate in SA, maturity of the SA REIT market, and the rental market in SA within the context of the residential property sector. Return on investment and management were considered to be the main barriers that discouraged SA REITs from including residential property in their portfolios.Research Limitations: There is a possibility of the element of bias due to a qualitative research approach and the relatively small number of SA REITs that participated in the research.Practical Implications: The research provides further insight into the hurdles presented to SA REITs with regards to incorporating residential property in their portfolios.Originality: Due to the infancy of the SA REIT market, a study of this type has yet to be conducted.