However, those who did their own stock-picking by investing directly in individual listed property unit trusts (PUTs) or loan stocks (PLSs) could have achieved considerably more than that in 2004. Latest figures from property asset managers Provest, in the Investec stable, show that a number of PUTs and PLSs achieved total returns of more than 50% last year.

The top performer in 2004 was Spearhead with total returns of 62%. Of that, 51% was share price growth (see table). The second best performer was Hyprop with a total return of 58%, followed by Octodec (51%), Capital (50%) and MICC (47%). But even if one had invested in the worst performing property fund last year which was Redefine, total returns would still have topped 20%.

Analysts agree that the sector could repeat its good run over the next 12 months as property fundamentals continue to improve. Vacancies (offices in particular) are expected to drop, which will result in firmer rentals. Investors are also expected to continue to pour money into investment properties. This is despite a number of funds already trading at a premium of between 30% and 40% to net asset value (NAV).

Provest MD Angelique de Rauville says she remains bullish for 2005.

She expects the sector to deliver total returns of at least 20% in 2005 on the back of a one percentage point drop in interest rates.

De Rauville believes Hyprop and Growthpoint will outperform their peers in terms of earnings growth.

Catalyst Securities portfolio manager André Stadler expects earnings growth to be in the region of 5% to 6% in 2005, which will ensure that the sector remains attractive to investors. He says property is likely to again outperform cash and bonds, but that equities could deliver higher returns in 2005.

Property economist Erwin Rode believes the focus will soon start shifting from residential to commercial property – a trend that could continue over the next few years. He says until recently, listed property performed mostly on the back of falling bond yields. From now on Rode expects the sector’s performance to be based primarily on stronger earnings.

"The non-residential property engine has just started to warm up and its’ quite possible that listed yields could fall further. This time round, capital appreciation will be driven by fundamentals rather than falling bond yields," says Rode.