Catalyst Fund Managers’ monthly overview, released yesterday, showed that on a 12-month rolling assessment equities had recorded a total return of 33,16%, followed by South African listed property with 15,09%, cash 8,75% and bonds 1,67%.
As an asset class, cash recorded 0,57% and bonds 0,22%, followed by South African listed property with a negative 0,25% and equities 3,50% last month.
Catalyst Fund Managers investment manager Paul Duncan said listed property was a long-term investment. “It provides an attractive historic rolled yield of 8,84%, with the prospect of medium-term growth in income in excess of expected inflation. In the long term, the growth should translate into capital value appreciation,” he said.
Duncan said that listed property remained an attractive alternative to cash and bonds.
analyst Keillen Ndlovu said in the year to date listed property had behaved like the bond market and had been far less volatile than equities.
“We view property as a source of income and capital growth over time. We are looking at listed property to give a one-year forward yield of 9,5%, driven by about 7% income growth. Although the income growth has slowed down, we take comfort in the fact that it is still inflation-beating,” Ndlovu said.
The yield of 9,5% compared well with cash at 8% and bonds (10-year) at 9,1%, he said.
This month sees eight companies in the SA-listed property sector reporting financial results that account for about 70% of the sector in terms of market capitalisation.
But growth in income distributions had slowed, as expected, from the double-digit levels achieved from 2006-08 to high single-digit growth on average last year.
Duncan said the expectation for this year was that growth in distributions would continue to slow slightly on average.
“The main drivers of this will be a gradual up-tick in average vacancy levels, lower rental level growth on expiring leases and higher operating costs,” he said.
Despite these factors, distribution growth was expected to still continue, driven primarily by contractual rental escalations of about 8% on the majority of portfolio leases, and fixed interest rate costs.
Investors would be looking closely at listed property companies’ results for an indication as to how property companies had been performing in a weaker economic environment.
Duncan said astute property investors factored in a lag between the direct economic environment and the results of property companies. From an international perspective, the best-performing listed real estate market was Asia, excluding Australia, which recorded a total return of 0,65%, according to the UBS global investors index.
North America was the poorest performing market last month, with a total return of a negative 5,29%.
There were varying r eturns on submarket level. Japan performed the strongest, with a total return of 5,22%, and the UK the weakest for the month with a total return of a negative 7,48%.
