Listed property the best asset class in SA

Posted On Friday, 15 May 2009 02:00 Published by eProp Commercial Property News
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SA’s listed property was the best performing asset class last month, recording a total return of 4,05% and outperforming equities and bonds, thanks largely to reduced risk aversion and improved investor confidence.

Andre StadlerThe all share index, was next best, recording a total return of 1,58%, followed by the all bond index at 0,96%. Cash recorded a total return of 0,81%.

Catalyst Fund Managers MD Andre Stadler said yesterday that SA’s listed property sector had also been the best performing asset class over a rolling 12 month period, with a total return of 17,45%.

Last month, three listed property companies published results, with Fountainhead, Premium and Octodec recording distribution growth of 9%, 12.5% and 1% respectively on their previous comparable periods.

“All these companies reported that, although slowing, the underlying portfolios recorded growth on expiring rentals. This, coupled with the contractual escalation on those leases that did not expire in the period, were the main drivers of distribution growth for the listed property companies,” Stadler said.

“These factors will continue to be the driver of distribution growth in the future. The main concern for companies appears to be the risk of tenant default and increasing vacancy levels,” he said.

In its listed property sector monthly review, released yesterday, Catalyst Fund Managers said the performance of the South African listed property sector was supported by the capital markets, which strengthened last month with the yield to maturity on RSA long-term gilt ending the month at 8,52%, from 8,60% in March.

Stadler said the historic yield of the listed property sector strengthened and ended the month at 9,05%, from 9,25% in March.

“Listed property shares are a long-term investment. The investment provides an inflation-beating income return with the prospect of growth,” he said.

Stadler said total return from listed property would be driven by the historic rolled income yield, the growth over time in that income yield, and the exit yield on listed property at the end of the investment period.

The listed property sector was trading at a historic rolled income yield of 9,05%. The historic rolled income yield includes distribution growth over a 12-month period but strips out distributions from the current price.

“The expectation is that over the next 12 months, income growth will slow but will still be in excess of inflation,” he said. Consensus sector income growth forecasts were about 8% a year over the medium term. “Due to the current macroeconomic circumstances, pricing will remain volatile in the short term. In the long term the growth should translate into capital value appreciation,” Stadler said.

 

Last modified on Tuesday, 29 April 2014 15:59

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