Listed property sector 'back on even keel' after recent plunge

Posted On Monday, 29 May 2006 02:00 Published by eProp Commercial Property News
Rate this item
(0 votes)

The South African listed property sector has stabilised after its unit prices plunged in value following the interest rate hike in the US

Andre StadlerAnalysts are confident the listed property market will recover in time because property fundamentals and distribution growth are strong.

The South African Listed Property Index has come down 8% since May 12 as the property sector, along with other asset classes, weakened after higher interest rates in the US.

The rates had caused lower tolerance for emerging market risk, so countries such as SA suffered.

Mariette Warner, head of property funds at Stanlib Asset Management, said last Thursday that listed property had "levelled off".

"After the recovery on Tuesday, the all-share index has pulled back again but not as low as it was on Monday," said Warner.

She said listed property had been treated by the market as an industrial or financial share during the emerging market sell-off, losing a similar percentage to what the all share index gave up.

"The listed sector has stabilised at 8% off its value at May 12."

Warner said it was unusual for listed property to be treated the same way as equities because its longer-term trend was to follow long-bond yields.

The performance of listed property tends to track the performance of long bonds because they are both income-generating investments.

Warner said listed property's downward movement was therefore driven by "sentiment and the equity market" - and not by property market fundamentals or the fixed-income market.

She said the yield on long bonds had only increased 12 basis points since May 12, while cash yields had increased only 20 basis points.

When yields go up, share prices go down.

Listed property's yield had increased 61 basis points since May 12.

"That translates into the 8% capital loss. Therefore there is a strong fundamental case for the listed property market being oversold and therefore a recovery is expected," she said.

Andre Stadler, MD of Catalyst Fund Managers, said "nothing has changed on the property fundamentals side".

"The fundamentals remain strong, distribution growth forecasts remain strong.

"Heightened global risk aversion has affected our markets and property is not immune to that, but in the long term the fundamentals should come through and be reflected in return.

"From our perspective, this reduction in prices has brought more value back into the sector."


Last modified on Tuesday, 06 May 2014 13:06

Most Popular

Africrest Properties completes mixed-use development, Stanley Studios in Johannesburg

Jan 21, 2020
39 Stanley Avenue
What could be better than living in an extremely well-priced apartment or working in…

Three stocks to boost your portfolio in 2020

Jan 22, 2020
Dr Adrian Saville CEO Cannon Asset Managers
After enduring a trying decade under the mismanagement and malfeasance of Jacob Zuma,…

New hotspots driving cost hikes in key data centre markets - thriving market in South Africa

Jan 21, 2020
Dan Ayley Turner and Townsend
Major global data centre markets are seeing soaring construction costs as development in…

Equites Property Fund Limited to develop a R1.3 bn warehouse for Pepkor

Jan 21, 2020
Andrea Taverna Turisan  CEO Equites Property Fund
Equites Property Fund Limited (Equites) today announced an agreement with leading…

2020 Commercial Property Themes –Electricity supply and cost will be a key wildcard for the Commercial Property Sector this year

Jan 23, 2020
John LoosFNB
Will electricity supply reliability and cost increases become a key issue again in 2020?

Please publish modules in offcanvas position.