This almost equals its record fall of 25% from May to July 2006, when SA suffered its first interest rate hike after three years of significant cuts.

The slide in listed property unit values appears to be due to global market jitters, which have caused a general fallout on the JSE.

On Monday the FTSE/JSE SAPY index lost 3,28% of its value. OnTuesday afternoon it recovered 2,34% of its value.

Keillen Ndlovu, co-head of property funds at Stanlib, said the recovery was due to the fact that the sector was “oversold on Monday” and now investors were trying to “pick up bargains”.

Ndlovu said high inflation, a weaker rand and global market jitters were behind the drop in value as listed property yields moved upwards in line with bond yields. The performance of listed property tends to track the performance of bonds as they are both income-generating investments.

Ndlovu said listed property was trading at a discount of almost 40 basis points to long bonds on a forward yield basis. He thought the sell-off had been overdone.

Ndlovu said institutional investors did not appear to be selling stock and that they generally invested in listed property for the long term.

“This kind of discount implies that there is no income growth expected from property, but we are expecting double-digit income growth over the next two years.”

Len van Niekerk, head of quoted property at Old Mutual Investment Group SA, said he believed the fall in unit prices was due to a combination of illiquidity in the listed property sector and “increasing risk aversion globally”.

Listed property stocks had followed the financial stocks and were “weaker relative to industrials and resources”, he said.

Van Niekerk said unit price volatility was expected to continue and the collapse of Bear Stearns, the fifth-largest US investment bank, had “spooked financial markets around the world”.

“What is happening in listed property has little do with underlying physical property fundamentals and everything to do with what is happening in global financial markets and inflation in SA,” Van Niekerk said.

Andre Stadler, MD of Catalyst Fund Managers, said: “How long it will take for the situation to normalise is extremely difficult to forecast and will be subject to the extent of the credit crisis.”