Listed property is a good bet, even in volatile times

Opportunities for investors are still there, thanks to higher yields and sound market fundamentals.

Volatile bond markets may have caused some suffering for SA’s listed property sector in recent weeks, but the opportunities for investors are still there, thanks to higher yields and sound market fundamentals.

Listed property prices decreased by 19 percent between 17 May and 24 June this year, something analysts say was a re-pricing in the face of changing global market dynamics.

These dynamics include US monetary policy decisions, uninspiring economics results in SA, and concerns about the Chinese economy.

The appeal of listed property is that it provides both a steady income stream and capital growth over time.

And, as Stanlib Head of Listed Property Funds Keillen Ndlovu points out: “Income is fairly stable and capital can be volatile. So listed property prices have changed but the market fundamentals have not.”

Bonds and listed property both generate income for investors, which is why they are closely correlated.

So when bond yields increase, listed property prices decline.

“It’s important to note that in the medium- to long-term listed property is a better bet compared to bonds, because it offers growing income whereas bonds do not,” he points out.

Currently, says SA REIT Regulation and Taxation Committee Chairman and Executive Director of Growthpoint Properties Estienne de Klerk, average yields in the sector are about 7.3 percent and most listed property companies are expected to grow distributions between 4 and 12 percent.

While a longer term change in bond yields could have a negative impact on the price of listed property stocks, property fundamentals remain solid.

The sector has already raised more than R10 billion in capital this year, from existing companies and funds.

 “All the equity raisings have been successful – and most have been oversubscribed,” adds Ndlovu.

And analysts expect several new listings to take place before the year is over.

As Ndlovu points out, SA’s listed property sector has seen this type of volatility before: with a decrease of 26 percent between May and July 2006; and a 37 percent decrease between November 2007 and June 2008.

“Listed property markets have fallen dramatically before – in 2006 and 2008 – but they came back over time. Why? The fundamentals were in place and the income was still growing,” he adds.

The good news is that listed property in SA is arguably more liquid and tradable than ever, at least for the larger counters.

SA listed property stocks have risen 10.6% since 24 June 2013.

* This report was prepared by SA REIT Association

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us