Listed property turns softer

Posted On Wednesday, 19 April 2006 02:00 Published by eProp Commercial Property News
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SA's listed property index recorded a total return of 7,27% last month, with the property loan stock and property unit trust sectors recording total returns of 7,22% and 7,13% respectively.

Andre StadlerCatalyst Fund Managers said strong property fundamentals contributed to listed property's performance and that these fundamentals continued to improve with strong distribution growth recorded by listed property funds and companies.

Total returns include income growth and unit price movement.

Catalyst said that, during February this year, half of the sector declared results with an average distribution growth of 8,9%.

"The expectation of future distribution growth will continue to drive demand.

"In addition, the investor market for property continues to broaden and was further stimulated by the February budget reduction in the income tax rate for retirement funds from 18% to 9%," said the group.

Catalyst said demand was the main driver of unit price appreciation last month, with more than R2,6bn worth of trades concluded. This is about 37% more than the average monthly trade of R1,9bn.

But Catalyst MD Andre Stadler said that so far this month the index was down 2,11%.

Stadler said the sector had "run quite aggressively from January to March" with a total return of 21,87% and had now pulled back and was "cooling off a bit".

The Catalyst MD said Grayprop and Growthpoint, the companies with the largest market capitalisations in the listed property sector, were down 4,89% and 4,13% respectively in terms of total return.

Angelique de Rauville, MD of Investec Listed Property Investments, said there had been a "considerable run in share prices" in the listed property sector during last month.

"There has been softening in share prices after March month end," said De Rauville.

She said that during last month there were considerable inflows of new investment into unit trusts, which in turn invest in listed property.

De Rauville said asset managers had also been "chasing" listed property stock in order to invest this new cash and that this had driven listed property unit prices upwards.

"We are quite grateful that investment inflows have started to dissipate because we were battling to find value in certain listed property stocks, given the high prices of some of these shares.

"With this weakness of share price after March 31 we have started to see value in certain stocks again," she said.

The listed property sector has been one of the top performing asset classes on the JSE in recent years and delivered a total return of 50% last year.

Over the past four years the listed property sector has on average delivered total returns of about 30% a year. The sector has so far this year delivered better than expected total returns.


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