Listed property index takes a slide

Posted On Monday, 10 March 2008 02:00 Published by eProp Commercial Property News
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The listed property sector lost 7,4% of its value over the past week as a weak rand and surging oil price weighed heavily on sentiment in the bond market

Ian AndersonOn Friday alone, the FTSE/JSE SAPY index lost 2,1% of its value, while on Thursday it shed 1,1%.

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

Ian Anderson, portfolio manager for Fortress Asset Managers, said the FTSE/JSE SAPY decreased to 307,69 on Friday and that the listed property sector had been on a “six-day losing streak since last Friday”.

“It’s obviously a function of what has been happening in the bond market. Bond yields have moved up substantially on the back of inflationary fears, which are linked to a surging oil price and a weakening rand,” Anderson said.

He said that as long as the rand remained weak and inflationary fears persisted, the property sector would in all likelihood “remain under pressure”. On February 28, the index closed at 332,26, but had since then been steadily losing value to reach 307,69 on Friday.

Anderson said it was important to bear in mind that globally, listed property stocks were “also under pressure” as a result of deteriorating market fundamentals and a significantly higher cost of capital. The UK listed property sector lost about 35% of its value last year.

Andre Stadler, MD of Catalyst Fund Managers, said the volatility in the local listed property sector reflected “a lack of investor confidence in investment markets generally”.

He said this lack of confidence was a result of significant uncertainty around “dynamics influencing the global macroeconomic environment”.

“From a local perspective, we’ve had concerns around inflation, a weakening currency and concerns around constraints to economic growth, all of which have exacerbated local investor uncertainty over and above the global environment,” Stadler said.

“This issue is not about the fundamentals changing significantly, it’s a pricing issue, where investors are requiring a higher return to allocate money away from cash.”

The fact that fundamentals in the property market are still strong was demonstrated by the 13 companies and funds announcing results during the February reporting season. The companies and funds distributions grew by an average 14% .

Listed property companies and funds also reported having low vacancy levels in their property portfolios because of strong demand for space.

Since the end of last year, the listed property sector has had a torrid time in terms of unit price movement as US market woes caused turmoil in world markets, including SA.

After falling 21% from the beginning of November, the FTSE/JSE SAPY recovered 10,54% between January 21 and February 20. But from February 20 until last Tuesday, it lost 4,95%.

Last modified on Tuesday, 22 April 2014 10:08

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