Thabang Mokopanele
10 July 2009
Johannesburg — THE South African listed property sector is the second-worst performing asset class with negative total returns of -2,25% for the year to date.
The sector was only outdone by bonds, which posted the lowest total return for the year to date of -4,86%.
The performance of listed property tends to track the performance of bonds because they are both long-term income generating investments. But last month the listed property sector delivered positive returns.
Brokerage Imara SP Reid's figures for listed property performance show the sector recorded a positive total return of 1,5%. The increase in total returns by listed property companies was as a result of retail-focused listed property loan stock company Acucap Properties and Sycom , reporting distribution growth of 10,4% and 11,1% for the year to March.
Catalyst Fund Managers' monthly overview released yesterday showed that for the year to date the best performing asset class had been cash, recording a total return of 5,07%, followed by equities or the all share index at 4,09% . The historic yield of the listed property sector similarly weakened and ended the month at 9,70% from 9,43% in May.
Catalyst Fund Managers MD Andre Stadler said yesterday assuming market consensus growth in distributions of about 8,50% over the next 12 months, listed property offered an initial forward yield of about 10,52%.
"This compares favourably with the 12-month deposit rate of approximately 7,50% on cash and the yield to maturity of 8,94% on the RSA Long Term Gilt. In addition, income on listed property has the potential to grow whereas the income on vanilla bonds does not. The big question for property investors is what growth in income is likely to be," Stadler said.
The listed property index recorded a total return of -1,81% for last month. But the property loan stock index and property unit trust index recorded total returns of -2,34% and - 0,22% respectively in the same period.
Capital markets weakened during the month, with the yield to maturity on RSA Long Term Gilt ending the month at 8,97% from 8,79% in May. Stadler said income growth was expected to slow in the next 12 months, but still exceed inflation. Consensus sector income growth forecasts were about 8% a year in the medium term. "Due to current macroeconomic factors , pricing is expected to remain volatile in the short term. In the long-term growth should translate into capital value appreciation," he said.
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