November 5, 2003

By Roy Cokayne

Johannesburg - Concern has been expressed about the consistency of property valuations used by listed property companies.

Len van Niekerk, an analyst at Andisa Securities, said yesterday there was a need for more vigorous valuations.

If the listed property sector did not regulate itself, regulation "will come from outside".

Van Niekerk told the Investment Property Databank/SA Property Owners' Association property investment conference there was a need for the methodology used by the listed property sector to be enforced by the SA Institute of Valuers, the SA Institute of Chartered Accountants or the JSE Securities Exchange.

He questioned the position of directors who did valuations without qualified opinion.
 

He said the portfolios of listed property companies were valued by external valuers every three years, but this was done by the company's directors in the other two years.

"This does taint the listed property sector and creates a degree of scepticism among institutions," he said.

Van Niekerk said "paper" was worth more than bricks and mortar.

The 11.7 percent yield of the property loan stock and 11 percent of the property unit trust sectors were low against the average office capitalisation rate of 14.4 percent.

Turning to general trends in the property market, Van Niekerk said there would not be a big recovery in the office market unless more jobs were created, particularly in the formal sector.