Listed property remains strong as bond yields show signs of rising

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Listed property in SA continues to outperform the All Share Index, posting higher total returns in August 2011 for the sixth straight month in a row, reports the Property Loan Stock Association (PLSA).

Monthly returns for the SA listed sector as a whole for August 2011 reached 2.6% compared with 1.4% in July 2011. Property loan stocks in particular posted a return of 2.5% in August, up from 1.3% in July.

This compares with -1.8% achieved in August by the All Share Index.

The highest returns in August were achieved by property loan stock Fortress B, with a return of 17.6%. Fortress B also posted the best year-to-date performance to August 2011, with 51.5%.

However, the sector is carefully tracking the All Bond Index, which reported 7.4% return in August.

“The risk lies in rising bond yields,” says Keillen Ndlovu, head of property funds for Stanlib.

“Listed property and the bond market are highly correlated because bonds have the ability to generate income – like property – and can also be predicted with relative certainty.”

Overall, listed property returns easily outpaced inflation, which means the sector is a good hedge against inflation, as Chairman of the PLSA, Norbert Sasse points out.

Two other loan stocks are achieving double-digit returns for the year to date: namely, Acucap and Fortress A.

“The retail sector - and particularly bigger shopping centres - continue to outperform the office and hospitality sectors, which are still feeling the effects of a weaker economy and over-supply,” explains Ndlovu.

The SA listed property sector is fast approaching R140 billion in market capitalization. “We expect the sector to continue to grow in strength and performance into the long term,” says Sasse.

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