THE South African listed property sector, which is tiny compared with its global counterparts, should attract the attention of foreign investors if it continues to grow and if its liquidity improves.

But the South African listed property sector is not yet on the radar screens of international fund managers, and it would need to triple its market capitalisation for it to start becoming attractive. South Africa’s listed property sector has a market capitalisation of about R45bn and assets worth about R60bn.

Some foreign-listed property companies have individual market capitalisations that are nearly the same size, or bigger than, the entire South African sector.

UK-listed property company Liberty International, which has a dual listing on the JSE, has a market capitalisation of about R36,6bn, while Australian-listed property company Westfield’s market capitalisation is bigger than the entire South African sector.

One of the important challenges facing the sector is sourcing commercial properties to grow the sector, and developing its own properties is an option.

Other options include sourcing properties from institutions such as insurance groups, pension funds and large corporations.

South African institutions hold assets worth billions of rand, though they are reluctant to part with their quality properties, particularly retail centres.

Corporations in SA are also sitting on high-quality properties worth billions of rand.

Listed property companies will have to work harder at persuading institutions and corporations to sell their properties if they want to grow the sector.

New developments are also attractive for listed property companies and a number of them are already busy on development pipelines.

Banks are eager to lend in the low interest-rate environment and commercial property developments are becoming lucrative.