New listings put onhold

Posted On Friday, 01 February 2002 03:01 Published by eProp Commercial Property News
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But new legislation allowing PUT’s to gear could help boost the sector’s attractiveness

Francois VirulyRISING interest rates, overdevelopment in some areas and a slower economy have resulted in less than favourable prospects for the listed property sector.

Under the current circumstances the sector is unlikely to attract many new listings, says James Templeton, Barnard Jacobs Mellet property analyst Until recently, it was generally expected that quite a number of institutions would bring their portfolios to the market this year, thus enhancing the size and liquidity of the listed property counters. Life assurers and pension funds own directly held property to the value of about R58 billion.

Francois Viruly of Viruly Consulting agrees that recent shifts in the long-bond rate and short-term interest rates will reduce the attractiveness of listings in 2002. Dividend yields in the sector are expected to weaken vis-à-vis yields in the direct property sector. And whilst the listed sector performed well the past 24 months on the back of declining interest rates, he reckons in 2002 investors will turn to opportunities for profit in commodities and rand-hedged investments.

However, the property unit trust (PUT) and loan stock (PLS) sectors have already increased its size substantially. Since June last year alone the sectors have seen a 50% increase in share capital.

Gerald Nelson, Chairman of the PUT Association, says more than 1,5 billion shares have been issued since the middle of last year bringing the current combined total market capitalisation for the two counters close to R13 billion.

Nelson says the increased share capital is a result of the move towards securitisation of property portfolios as well as the funds’ attempts to grow their portfolios.

The majority of the activity to date has taken place in the PLS sector, and Nelson atributes this to loan stocks’ ability to gear. He reckons although property fundamentals are currently under pressure, growth in the PUT sector is expected to follow suit as a result of the recent approval by die Financial Services Board (FSB) to allow PUTs to gear to a maximum of 30%. However, he points out that the PUT sector is cautious against using gearing to enhance returns by purchasing high-yielding poperties. ``Fundamentals come home to roost, particularly in a property market labouring with oversupply.’’

Last modified on Tuesday, 29 April 2014 09:17

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