The UBS Global Investors Index released yesterday recorded a total return of 3,4% last month. Asia excluding Australia was the poorest performing market, recording a total negative return of -0,64%.

Australia had a total return of 2,31%, while Europe was the second worst performer with a total return of -0,53%.

Catalyst Fund Managers investment manager Paul Duncan said yesterday there were recurring themes in the global property market.

“Asset devaluation is starting to slow and in some regions assets are appreciating. The availability of capital, although still tight, is starting to ease,” Duncan said.

He said well-capitalised property companies were now looking to be net acquirers of assets and not net sellers.

A potential source of acquisitions would be distressed sales as a result of the global recession.

Property fundamentals — occupancies and market rents — were also starting to decelerate in their rate of decline and were expected to bottom out over the next six to 12 months.

Duncan said he expected fundamentals to stabilise but remain challenging for some time to come. “A strong recovery is only likely once the economies move to a net hiring phase.

“Company asset allocation decision making over the medium term will be key to long-term success,” he said.

As an asset class, property offered a very attractive yield relative to bonds and cash reflecting the weak fundamentals.

Unlike bonds and cash, property as an asset class offered the opportunity to participate in longer-term improvement in fundamentals as they translate into income growth. The key issue was the time frame, pace and nature of a mooted recovery.

According to Catalyst Fund Managers’ monthly overview, South African listed property companies were characterised by low loan-to-value ratios compared with their global counterparts and banks are still comfortable to lend money to them to buy properties. The index showed that most South African listed property companies’ management teams expect an increase in opportunities to acquire yield- and quality- enhancing properties.

Duncan said that certain listed property companies had begun to invest in or investigate offshore opportunities.

“Certain property companies are using the current environment to sell noncore assets,” Duncan said.

He said redevelopment of existing assets was continuing, but no speculative activity was being undertaken. “Those companies that undertook speculative developments in the previous one to two years have experienced poor take-up of space and this is diluting their income distribution expectations.”

A major challenge was the large increases in municipal rates and electricity tariffs.

Although most lease agreements provided for the collection of these costs from tenants, most management teams say these large increases are increasing the tenants’ overall occupancy costs to levels that affect lessors’ ability to achieve rental growth when negotiating new rental terms.