Cape Town - The SA property index, which represents property unit trusts and property loan stock companies on the JSE Securities Exchange, produced a negative return in January of minus 0.74 percent.

This was primarily because of the negative reaction of capital markets to the weakening rand, André Stadler, the managing director of Catalyst Securities, said yesterday.

The property unit trusts sector returned minus 0.19 percent, while the property loan stock sector returned minus 1.21 percent.

According to Capital Securities' latest listed property sector monthly overview, the rand weakened to R6.10 to the dollar in mid-January from its six-year high of R5.63 at the end of December.

But by the end of last month it firmed again to R5.96.

Capital markets reacted adversely to the softer rand, with the benchmark R153 bond yield weakening by 29 basis points to 8.11 percent by mid-January.

But bond yields recovered strongly in the last half of January in response to the rand's gain and ended the month 43 basis points firmer at 7.69 percent.

For February, Stadler said the SA property index closed 3.8 percent up on Friday, reflecting the improved bond yields since mid-January. 

There was normally a lag between the change in bond yields and listed property's reaction, he said.

The yields of listed property closely track the yields of long bonds, implying that investors view them in a similar light.

This is because listed property is made up of contracts that stretch over a few years and that provide regular and relatively certain income streams, similar to that of bonds.

According to Capital Securities' monthly overview, the weakness in the first half of January created buying opportunities in certain stocks with large market capitalisations, which led to some showing intra-month price movements of up to 10 percent.

Only seven out of the 27 listed property stocks ended January in the black. Top spot for the month went to Martprop, with a total return of 6.67 percent.