Catalyst Fund Managers’ monthly over view released yesterday showed the property loan stock index and property unit trust index recorded total returns of -3,77% and -0,72%, respectively, over the same period. The capital markets weakened during the month with the yield to maturity on RSA Long Term Gilt ending the month at 8,79% from 8,52% in April.

The historic yield of the SA listed property sector similarly weakened and ended the month at 9,43% from 9,05% in April. The JSE’s all share index recorded a total return of 10,33% for last month.

The performance of listed property tends to track the performance of bonds because they are both long-term income generating investments.

“This performance was supported by an increase in international commodity prices and global stock markets. The performance of the bond market appears to have been driven by the outlook for government issuances and uncertainty regarding the South African inflationary outlook,” said Catalyst Fund Managers investment manager Paul Duncan.

The all bond index recorded a total return of -0,47% for last month, which was slightly better than listed property. South African listed property has recorded a total return of 21,32% for the 12 months ended last month. “Listed property shares were a long-term investment. The investment provides an income return, with the prospect of growth,” he said.

Duncan said total return from South African 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 time horizon.

“What we know is that the South African-listed property sector is trading at a historic rolled income yield of 9,43%. The important question is: what is the growth? A defining feature of listed property is that the income the listed property companies distribute has the ability to grow,” he said.

“Cash income yields can increase or decrease based on changes in the repo rate.”

The expectation was that over the next 12 months income growth in the property sector would slow but still be in excess of inflation. Consensus sector income growth forecasts were about 8% a year over the medium term.

Duncan said that due to the current macroeconomic circumstances, pricing would remain volatile in the short term, but in the long term the growth should translate into capital value appreciation.

Last month, four property companies reported results and distribution numbers with Vukile, Apexhi, Ambit and Redefine recording income distribution growth of 10,9%, 9,6%, 7,0% and -1,1% on their previous comparable periods, respectively.