Beating housing’s risky reputation

Despite growing demand for homes, JSE investors have always been slow to take a bite, writes Joan Muller

HUGE demand for affordable housing should, in theory, make the JSE a popular place for residential landlords to raise capital. Yet, until about a year ago, Premium Properties, now merged with sister fund Octodec Investments, was the only stock among the JSE’s 45-odd real estate counters to offer income-chasing investors part exposure to the rental housing market.

Unlike their US and European counterparts, the South African listed sector has traditionally shied away from residential property because of a perception that housing — particularly the lower-income rental sector — is way too risky.

Having to deal with delinquent tenants, rental arrears and SA’s onerous eviction legislation, which favours tenants, are some of the key concerns.

Besides, most listed property companies are making more than enough money from their retail, office and industrial building portfolios, and have no pressing need to look for alternative revenue streams.

Despite constant talk of bringing housing portfolios to the JSE, nothing has materialised until now. The most recent attempt to list a specialist housing fund was by industry veteran Gerald Leissner, CEO of Arrowhead Properties, who was forced to can his proposed Kwami Residential Fund in 2010. At the time, Leissner said he had battled to assemble a big enough portfolio that would offer the size and liquidity to pique the interest of institutional investors.

Five years on, Leissner’s plans are coming to fruition.

Arrowhead took its first leap into the housing market early last year when…

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