By Thabang Mokopanele

Income distributions in the listed property sector are likely to continue showing real growth in the long term, despite the outlook for the factors that influence distributions remaining challenging over the next 12 months, according to the latest report on the listed property sector by Catalyst Fund Managers.

This month is a busy reporting period for the South African listed property sector, with nine companies reporting either full-year or interim results. The companies reporting this month account for about 60% of the sector in terms of market capitalisation.

Catalyst Fund Managers portfolio manager Paul Duncan says the results and commentary will give investors "good insight" into how the direct property fundamentals are likely to affect the outlook for income distribution growth.

Uncertainty in local and global capital markets is also expected to contribute to listed property unit price volatility. Like bonds, listed property unit prices are inversely related to the movement in listed property income yields.

Listed property income yields are highly correlated to other fixed income yields, especially over the short term.

Duncan says the major risk to total returns in the short term is a further weakening in capital markets. However, he says: "Listed property is a long-term investment and over the long term the total return from listed property will be driven by the income yield plus growth in that income."

The South African listed property index recorded the highest total return of 1,6% of the four traditional asset classes for last month. Bonds at 1,42% and cash (0,44%) were the next best performing asset classes for the month. Equities recorded a total negative return of 1,99%.

South African listed property, as an asset class, has also recorded the highest total return for the past 12 months, at 14,73%.

Capital markets firmed slightly during the month, with the yield to maturity on the long-term government bond index ending the month at 8,27% from 8,39% in June.

The historic 12-month rolled yield of the South African listed property sector ended the month at 7,88% from 7,91% in June.

Duncan says concern about a Greek sovereign debt default, euro-zone sovereign debt contagion, the effect of a US credit downgrade and uncertain global growth is creating increased uncertainty over the global macroeconomic outlook.

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Source: Business Day