Listed property outperforming

South Africa's listed property will remain to attract investors seeking firmer ground for trading.

Last year, equities outperformed the listed property sector as an asset class, although head of property funds, Keillen Ndlovun at Stanlib, delivered convincing reasons to include listed property in investors’ portfolios, during last month’s IPD SA conference in Sandton.

He quoted the Hebrew proverb, “He is not a full man who does not own a piece of land.”

Listed property of South Africa delivered total returns of 8.4% last year, overtaking cash and bonds. Bonds returned 0.6% as cash returned 5.2%. Last year however, since 2009, equities overtook listed property for the first time, with a 21.4% total return, over double the sector’s 8.4%. Over the previous 15 years, listed property has overtaken bonds by 13.3% each year, a direct consequence of the asset class’s ability to produce inflation-beating income growth.

During the presentation at the IPD SA conference, it was highlighted that listed property performed to market expectations despite an unbalanced year for the sector, producing 6.8% income returns and 1.6% capital returns.

Listed property is the highest performer of the four traditional asset classes from the recent 15 years, outperforming equities by 6.4% each year.

South Africa’s listed property market capitalisation has increased more than 10 times over the last decade to over R250billion.

It was pointed out that there is a place for listed property with investment portfolios, more so than bonds and cash. This is as listed property offers rising income, unlike bonds and cash.

This is one of the major attributes for listed property having overtaken bonds and cash over time, with this trend to remain in the medium to long term.”

Up to mid-May last year, listed property had delivered 21% of total returns for the year.

There is a close relation between movements in bond yields and listed property.

Furthermore, the local sector’s physical property fundamentals continue to be firm, at 53% retail exposure, 28% offices, 15% industrial, 2% hotels and 1% residential.

The listed property sector is beginning to experience rising exposure in residential property space, with great growth potential. A trend has also begun in residential property funds listings on the local board.

Fundamentals are said to continue to stay strong within listed property as vacancies are stable and retail has provided positive turnover growth. Expectations have been met as companies have met and even exceeded distribution growth expectations.

The listed property sector remains to raise surprising sums in a simply good market. The sector raised more equity in comparison to earlier years — approximately R18billion last year, over R11billion raised during 2012 and R16billion during 2011. All current real estate investment trusts were able raise equity required.

The industrial market has shifted towards distribution centres, logistics or warehouses, where growth is occurring as new retail developments continue to be developed, for over the upcoming years.

The office space sector currently experiences slightly higher vacancies due to the oversupply of B-grade and C-grade offices. The country’s skyline is evolving as companies shift their head offices to new buildings.