Listed property investors skittish after rate hike

Posted On Wednesday, 04 July 2007 02:00 Published by eProp Commercial Property News
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The South African listed property sector has been experiencing some price volatility because of uncertainty about interest rate movements

Andre StadlerAndre Stadler, MD of Catalyst Fund Managers, said on Monday that from June 1 to June 30 the South African Listed Property Index had shed 3,39%.

The movement was not dramatic, but the previous month the sector also experienced some weakness, falling 3,66%.

Stadler said the weakness was "primarily" a result of the increase in interest rates at that time. "The market is still trying to find its level after the interest rate hike. The market has become uncertain about interest rates, and that uncertainty has resulted in some weakness and more volatility."

Stadler said he expected volatility in listed property prices to continue until there was more certainty a bout inflation and interest rates globally and locally.

Evan Robins, property analyst at Nedcor Securities, said the listed property sector had been "pretty resilient considering the interest rate movements".

But Robins said he would expect volatility in listed property prices to "remain heightened".

Angelique de Rauville, MD of Investec Listed Property Investments, said the listed property sector had priced in last month's 50 basis point interest rate increase and had also priced in a further 50 basis point increase in the second half of this year.

The listed property sector was very volatile last year, when it found itself in a similar interest rate scenario, she said. Last year it shed 25% of its value after interest rates went up.

"Listed property is demonstrating itself to be more resilient to increases in interest rates compared with last year. We believe this is on the back of exceptionally strong property fundamentals and earnings growth, both of which are exceeding that of last year," De Rauville said.

Len van Niekerk, head of quoted property at Old Mutual Investment Group, said listed property returns were caught between opposing forces.

"Short-term capital movements are volatile, and have been negative but underlying income streams from property companies are stable and growing.

"Listed property is a long-term asset and return expectations should be shaped accordingly," he said. "Those with a short-term outlook could be disappointed, but patient investors have the ability to buy secure, growing income streams at lower prices."

Ndabe Mkhize, investment analyst at Coronation Fund Managers, said that "property fundamentals, as well as the consolidation in the listed property sector, is providing some underpin to the prices in the sector".

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