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To REITS or not to REITS

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Hi

 

I have a TFSA account with ABSA stockbrokers and would like to buy a REITS ETF.

My primary objective is the income stream. Capital growth would be nice but secondary.

 

I have 2 questions:

1.      Do you feel it is a good time to buy into REITS given the following:

  • Too many malls in South Africa.
  • Malls struggling with full occupancy because of the consumer being under pressure.
  • An increase (albeit slow) in online shopping.
  • Slowdown in local manufacturing output which might lead to industrial parks coming under pressure as well.
  • People being jittery about property in general because of EWC.

2.      Which REITS ETF do you feel offers value at the moment?

If anyone feels it is better to buy a specific REIT like Growthpoint or Redefine then please recommend. I am not hung up that it has to go into a TFSA.

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Question 1:

 

Until 31 December 2017, the Coreshares PropTrax 10 ETF (PTXTEN) was (as far as I can recall) the second best performing ETF in South Africa over the 10 year period, second only to STXIND. Come 1 January 2018, within a few weeks, the ETF promptly lost 30% of its value. This means the ETF is probably the cheapest it has ever been and in the long run, I think it is probably the best buy as far as local property ETFs go at the moment. That being said, I don't see it gaining much in the short term, especially with the uncertainty over the land issue. However, long-term, I still consider it to be an excellent buy. At the moment I have 11% of my TFIA in PTXTEN and still buying my R300 of PTXTEN every month (Rand-cost averaging this ETF). Also, because it's so cheap, yields are very high at the moment making it an excellent choice for income.

 

Question 2:

 

I wouldn't do a specific REIT, reason being that the property recovery may take several years, and the risk of owning one company for that long becomes huge. I'd much rather buy the index, as there is no way of knowing if any one company will outperform the index or not in the long term.

 

PTXTEN is an equal-weighted ETF holding 10% of each of the listed property Top 10 with an average annual yield of between 7% and 8% over the past 10 years. This would certainly be my choice as far as property investments go.

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Question 1:

 

Until 31 December 2017, the Coreshares PropTrax 10 ETF (PTXTEN) was (as far as I can recall) the second best performing ETF in South Africa over the 10 year period, second only to STXIND. Come 1 January 2018, within a few weeks, the ETF promptly lost 30% of its value. This means the ETF is probably the cheapest it has ever been and in the long run, I think it is probably the best buy as far as local property ETFs go at the moment. That being said, I don't see it gaining much in the short term, especially with the uncertainty over the land issue. However, long-term, I still consider it to be an excellent buy. At the moment I have 11% of my TFIA in PTXTEN and still buying my R300 of PTXTEN every month (Rand-cost averaging this ETF). Also, because it's so cheap, yields are very high at the moment making it an excellent choice for income.

 

Question 2:

 

I wouldn't do a specific REIT, reason being that the property recovery may take several years, and the risk of owning one company for that long becomes huge. I'd much rather buy the index, as there is no way of knowing if any one company will outperform the index or not in the long term.

 

PTXTEN is an equal-weighted ETF holding 10% of each of the listed property Top 10 with an average annual yield of between 7% and 8% over the past 10 years. This would certainly be my choice as far as property investments go.

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If local - would consider

 

Storage - SSS - storage units

Hyprop - HYP - pretty much top end retail - always grows dividends - although forecast to slow down slightly. Has (I think 20%) overseas exp

Fairvest - small urban, often township centers. Seems they have found a gap and execute really well. Always grow yields.

 

Overseas - Ecko Polska - polish retail - sure, you pay 20% tax but you do get euros.

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