South African listed property entered 2026 from a position of strength. January extended the powerful rerating that defined 2025, with the All Property Index delivering a total return of 1.08%. January saw several bellwether REITs trade at fresh 12-month highs, including Growthpoint Properties, Vukile Property Fund, Redefine Properties, and Hyprop Investments, extending the strong rerating that defined 2025. The JSE All Property Index is now at its highest level since 2018, rewarding patient investors who kept faith with the sector. Trading volumes were muted after the festive period, but price action confirmed that last year’s rally was not simply a year-end squeeze. Income-seeking capital continues to seek best-in-class listed property investments. Certain offshore focussed counters also improved in January (Hammerson, Primary Health), while the problem that is Schroders European REIT continued its slide losing -4.73%. Sector-wise healthcare led the way up 5.52%, Diversifieds were up 1.18%, Retail 0.80%, and Office struggled losing -12.21%. The message from January was clear: capital is still flowing into the sector, but it is becoming more selective. Importantly, valuations are not yet stretched. Despite the sharp recovery, most domestic REITs continue to trade at discounts to NAV, with forward income yields in the high single digits. Balance sheets have improved materially, with sector loan-to-value ratios now averaging around 35.2%, down from pandemic-era peaks near 44%. Expectations for 2026 need to be managed. A repeat of 2025’s near-30% sector return is improbable. That said, assuming inflation continues to moderate and interest rates ease gradually, a 15% to 20% total return remains achievable (we would give it a probability of 40%). At this stage of the cycle, returns will be driven less by multiple expansion and more by income growth, asset management execution, and capital discipline. Key sector indicators entering 2026 support this view. The full sector trades at an average NAV discount of roughly -6.1%. One-year forward income yields are clustered between 7% and 8%. Consensus earnings growth expectations sit in the 5% to 7% range, with meaningful dispersion between names. The year is off to a solid start but investors should brace for bouts of deep market instability driven by macro factors. The Trump presidency remains a source of global instability in strategic and economic terms. While the forcible occupancy of Greenland is (currently) off the table, actions in the Persian Gulf and Caribbean remain of deep concern.