By Thabang Mokopanele

South African listed property was the second-best performing asset class last month, recording a total return of 3,53%.

South African listed property was the second-best performing asset class last month, recording a total return of 3,53% — being beaten by equities with an 8,74% return.

Bonds came in a distant third, returning 0,76%.

According to the Catalyst Fund Managers’ monthly report, released yesterday, South African listed property remained the best-performing asset class for the year to date, returning 25,68% to investors. Over the past 12 months it returned 30,77%.

The historic rolled income yield of the South African listed property sector is 7,72%.

“This implies a forecast forward rolled income yield of 8,26% (assuming 12-month income growth of 7 %). Importantly, the income from a listed property investment has the ability to grow per annum,” Catalyst Fund Managers investment manager Paul Duncan said.

Mr Duncan said the forecast forward rolled income yield compared favourably — albeit with arguably more risk — to the income yield to maturity on a 10-year bond proxy of 7,9 %, the one-year negotiable certificate of deposit rate of 6,48% and the South African benchmark overnight rate of 5,76%.

Mr Duncan said that after travelling to Europe and the UK and speaking to different listed property management teams, it emerged that there would be a greater divergence in performance between prime and secondary international properties.

European managers also told him the flood of distressed properties for sale had not materialised, but could play out to a lesser extent over the next few years, especially during 2012 and 2013, when 2007 five-year debt matures.

European managers were taking advantage of the low interest rate environment and using it to extend their fixed-debt exposure.

“It also appears that margins on debt have improved over the last six months. Austerity measures will have a negative impact on consumer spending over the next few years and having assets of superior quality in the correct locations will be key.”

Source: Business Day