Great returns despite recession

Posted On Sunday, 10 October 2010 02:00 Published by eProp Commercial Property News
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LEON Allison, research analyst at Macquarie First South Securities, said listed property has achieved an average total return of 20% per year for the past five years.

 

Leon Allison“This includes a -5% result for 2008, and 14% in 2009. In 2010 we expect a return of around 18%,” Allison said.

“This demonstrates just how surprisingly good listed property’s performance has been, despite the recession. It’s been a resilient, defensive option; more so than even the overall market.

“Listed property’s short-term future doesn’t look so bullish. In the next year I’d expect a total return of around 10%, rising to 12%-15% over three to five years, and possibly similar growth over the next decade.”

Paul Duncan, portfolio manager at Catalyst Asset Managers, said listed property’s defensive income yield would outstrip that of cash and bonds in the medium term.

“But that’s because of its riskier profile. Growth in income and yield is its greatest attraction, while a bond’s coupon will remain static,” Duncan said.

“Over the long term investors would want the sector to achieve a 13% rate of return, and I think it’s likely to be close to that. It’s not cheap or expensive right now — I think the sector is priced fairly on today’s value.”

Norbert Sasse, chairman of the Property Loan Stock Association (PLSA) and CEO of Growthpoint Properties, said: “Listed property has been the best-performing asset class in SA to date this year.

“With a sector market capitalisation of R120-billion, listed property continues to grow.”

Sasse said the sector’s resilience was evidence of the defensive quality of SA listed property.

“Over the past 12 months the weighted average return of the sector totalled 18.8% and total returns for 2010 year-to-date measure 22.1%. The sector has an average forward yield of 8.4% and its distribution growth over the next 12 months is expected to be between 7% and 9%.”

Last modified on Tuesday, 22 April 2014 11:44

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