By Evan Pickworth

Despite recent declines, a raft of new property equity listings from May is set to raise the game in the listed property space in SA, with the size of the market and liquidity likely to improve.

Moves off the trough will offer investors some reasonable growth prospects, according to a leading analyst.

Keillen Ndlovu, head of property funds at Stanlib, said during a briefing on Friday that the market cap of the listed property sector was due to lift by R22 billion, or 20%, in the next six to eight months, with consequent liquidity benefits as the sector was deepened and attention shifted away from the big counters.

He said listed property offered an opportunity to diversify away from equities and the sector remained a strong performer in the longer term, where annualised growth of more than 15% has been seen. In the short term, returns are down to just 3%. He sees a forward income yield of 9.1%.

Ndlovu is also fairly positive offshore listed property has a place as it will track global GDP growth amid signs the US consumer is coming back. It also offers a rand hedge if the rand weakens. He sees demand improving for space in the retail property sectors.

He expects the offshore dollar property fund to return about 7%-8%, with income delivering a 3.8% return.

"Valuation has reached a trough, while the earnings profile has bottomed," he said.

The risk, though, is of inflation or interest rate hikes.

Bond and property returns track each other closely, with a much higher correlation than with equities, which is where the diversification opportunities arise.

Source: I-Net Bridge