Do property funds with exposure to Australia fair differently?

The global economic landscape has been turbulent, with political uncertainty and fluctuating markets impacting various asset classes. One such sector facing challenges is the property market, particularly in South Africa. In a recent interview on CNBC Africa, Nick Riley, CEO of Investec Property Fund, and Graeme Katz, CEO of Investec Australia Property Fund, discussed the performance of property funds with exposure to Australia, contrasting it with the challenges in South Africa. Over the past decade, listed property shares on the Johannesburg Stock Exchange (JSE) have outperformed the market. However, the recent downgrade to junk status in South Africa and political uncertainties have put pressure on the property sector in the country. Riley highlighted the impact of the downgrade on interest rates and the value of properties, which are inversely related to interest rate movements. The market is experiencing a deficit of demand across office, industrial, and retail sectors, with retail facing significant pressure. Additionally, there is an excess supply in certain segments, creating a challenging environment with pressures from multiple ends. Despite the challenging backdrop, Investec Property Fund managed to achieve a 8.7% growth in net property income, with a focus on reducing the cost to income ratio and retaining tenants to minimize the cost of acquiring new tenants. The company's performance stands out in comparison to peers in the market. On the other hand, Investec Australia Property Fund has shown steady growth over the years, with a significant increase in portfolio size and a total return of over 74% since listing. Katz highlighted the stable and predictable market conditions in Australia, with positive growth rates and improving rental markets in major capital centers such as Sydney and Melbourne. The market in Australia, characterized by strong migration and low inflation, provides a contrasting picture to the uncertainties in South Africa. Despite the challenges, both CEOs expressed optimism about the future prospects of their respective markets. Riley acknowledged the capital outflow from South Africa into international markets, emphasizing the need to manage what's within the company's control and hedge against external risks like interest rate movements. In contrast, Katz discussed the opportunities in Australia for active asset management and value-seeking strategies in a relatively steady market. While South Africa presents opportunities amid adversity, with potential pricing shifts and trading opportunities, Australia offers stability and room for strategic investments to capitalize on mispricings. By navigating the complexities of property investments in uncertain times, both companies aim to leverage their strengths and strategies to navigate the unique challenges and opportunities in their respective markets.