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Boom in the listed property sector appears to be over for a while, say experts.

Posted On Wednesday, 21 May 2003 02:00 Published by eProp Commercial Property News
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While some large property funds are optimistic about the market, others believe it could stay flat for the time being despite reports of excellent returns.

Brian AzizollahoffTHE boom in the listed property sector appears to be over for now, and while some large property funds remain optimistic about the sector, others believe it may stay flat for the time being.

 Last week it was reported that the excellent returns seen on the listed sector of late, combined with the opportunity to invest in property without the hassle of direct ownership, had boosted investor interest in property unit trusts and loan stocks.

 Brian Azizollahoff, CE of Redefine Income Fund, said the bottom line was to acquire good properties with good tenants in good locations.

 He said the industrial sector was looking interesting at the moment, thanks to last year's competitive rand exchange rate.

 Metboard fund manager Jeffrey Sher said the industrial market was active; there was a good demand countrywide and not only in Gauteng. He said the company also had low vacancies in Durban and Cape Town.

 SCMB Securities property analyst Len van Niekerk said the boom in the listed property sector in recent months seemed, for the large part, over.

 "Although this doesn't mean there will be a crash," he said.

 However, Van Niekerk expected the listed property prices to be flat for the next six months, saying this had been the case for the past month. "There could be marginal appreciation if bond yields decline," he said.

 Barnard Jacobs Mellet Securities property analyst James Templeton said his biggest concern was the industrial market.

 "The rand's strength will undoubtedly have an effect on the export market," Templeton said.

 "The industrial market has in recent months been quite strong, but it will be affected by the rand's strength".

 This would also have a negative effect on vacancies, he said.

 John Rainier, MD of Allan Gray Property Trust (Grayprop), said it was no secret the "physical property market (was) under severe stress", but there were early signs of potential improvements. "Property markets mirror the economy as a whole."

 Rainier said there were signs the economy was "being pushed into trouble". If there was not a significant interest rate cut in June, he would be concerned.

 If inflation was overstated, "then real interest rates are higher than people think and that is not good for the economy".

 The saving grace for property as a whole was that its underlying income stream was made up of lease income, which was secure and carried annual escalation in the rent, he said.

 Rainier said the property market as a whole was not yet in the clear. However, this was being said last year, and the property trust sector outperformed the all share index for the year ended March this year.

 "You cannot afford to be out of property," he said.

 Gerald Nelson, MD of Sycom Property Fund and CEO of Coronib, said the interest on the listed property sector had "abated" and that it was going to take some fundamental changes such as the lowering of interest rates before further "appreciation" was seen in the listed property prices.

 "The next phase we are going to see is a declining interest rate environment and that will improve listed property prices."

 How long the sector remained flat depended on when and how large the interest rate cuts would be. He said some analysts were expecting a 2%-3% cut by the end of the year.    

Last modified on Monday, 05 May 2014 15:49

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