The liquidity of listed property unit trusts and property loan stock companies on the JSE Securities Exchange SA has improved substantially over the past two years.
Better liquidity should make listed property more popular as an investment. Listed property has in the past been neglected by investors, who have favoured other stocks on the JSE.
This is changing with improved liquidity, and listed property stocks have started attracting a lot more interest from the large institutional investors.
Ian Anderson, investment director at The Income Specialists, a division of Marriott, says that in the late 1990's, before investors began giving the listed property sector serious consideration, the average monthly rand value of property unit trust and property loan stock units traded on the JSE was about R100-million.
Last year, that figure grew to R550-million a month, while this year more than R800-million worth of units are being traded a month.
In terms of rand value, the total amount of units traded in the listed property sector last year was R6,6-billion.
Anderson says R6,8-bllion worth of units have been traded so far this year and at this rate the listed property sector could finish the year with more than R9-nillion worth of units traded.
This represents more than 30% of the market capitalisation of the property unit trust and property loan stock sectors.
Anderson says that last year listed property funds also raised significant capital by way of private placements of units and rights issues.
This factor is not included in the monthly figures because the trades are not taking place on the JSE, but Anderson says it should be included because it allowed investors access to the listed property funds.
"Last year the new capital that was raised through private placements and rights exceeded R5-billion, which would have taken the average monthly value of units traded above the R1-billion mark, which is significant," says Anderson.
He says increased liquidity is attracting large institutional investors into the listed property sector.
These investors are in turn improving the liquidity.
Anderson says liquidity in the listed property sector is expected to continue to improve provided the sector continues to grow in terms of the listing of new property portfolios and the acquisition of properties by existing funds.
"The liquidity is good already. It's unlikely its going to improve dramatically if the value of listed funds does not increase," he says.
One of the most important challenges facing the listed property sector at the moment is where it will source commercial properties.
In the present climate, listed property funds are finding it difficult to compete with private investors when it comes to acquiring properties.
The main reason is that private investors are more willing to pay the expensive asking prices in the commercial property market, while listed property funds are loath to pay them because of the dilutionary effect the acquisitions would have on distributable earnings to unitholders.
One option to get around this challenge would be for listed property funds to initiate their own commercial developments. Anderson says ApexHi, Growthpoint, Martprop, Grayprop, Redefine and Pangbourne are among the most liquid stocks in the listed property sector.
Growthpoint CEO Norbert Sasse says the level of liquidity that has been achieved in the listed property sector since the beginning of the year has been "quite phenomenal".
Sasse says further confirmation that listed property has improved its stakes as an asset class is evident in the increase in the number of unit trusts that specialise in investing in the listed property sector.
