SA Listed Property Growth Has Taken a Dive
There was very little in the way of positive news for South Africa’s listed property investors as the sector is down 1% in the year-to-date due to a number of reasons.
The SA listed property index (Sapy), which makes up the JSE’s 20 largest real estate stocks, has been on the back foot since February.
The index has shed 1% in total returns delivered in the year-to-date, emerging as the worst performing asset class compared with equities, cash and ten-year government bonds.
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Although at some point the listed property sector was up almost 6%, all the gains have been lost due to bond yields moving up, largely driven by a weakening rand, political volatility and downgrades by rating agencies, says Keillen Ndlovu, Stanlib head of listed property funds.
The property stocks have had a relatively subdued reaction to the downgrade by S&P Global Ratings and the dismissal of Pravin Gordhan as finance minister and Mcebisi Jonas as his deputy.
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According to Ndlovu's report, Equities were the best performer with 5.5% returns followed by Cash and Bonds at about 2% each. He said the property sector generally has a negative relationship with bond yields – when bond yields fall property prices rise and vice-versa.
SA Listed Property Prices versus Bond Yields and the Rand
Bond yields have risen on the back of a weak rand, which has been negatively affected in recent weeks by political uncertainty and double ratings downgrade to junk status by S&P Global Ratings and Fitch.
The rand has weakened by 3% and bond yields have risen as high as 8.9% since president Jacob Zuma’s politically-charged cabinet reshuffle.
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A look at the performance of individual property stocks shows a wide divergence between the winners and losers in the first three months of 2017 (see below)
Source: Catalyst Fund Managers.
| Best performing property stocks in the year to March 31 | ||
| Company | Total returns | Share price movement |
| Ingenuity Property Investments | 17.78% | 17.78% |
| Dipula Property Fund-B | 16.67% | 30% |
| Ascension Properties- A | 14.56% | 5.49% |
| Gemgrow Properties-B | 14.24% | 7.69% |
| Texton Property Fund Limited | 14.18% | 3.54% |
| Worst performing stocks | ||
| Tradehold Limited | (18.56%) | (20.21%) |
| Acsion Limited | (17.58%) | 5.49% |
| New Europe Property Investments | (12.45%) | (8.32%) |
| Redefine International | (7.27%) | 2.61% |
| Mara Delta | (6.78%) | (10.81%) |
SA-focused property companies have emerged as the best-performing stocks and the biggest losers are offshore property stocks, which are still recovering from the recent rand strength.
Even the share prices of liquid sector heavyweights including Growthpoint Properties, Redefine Properties and Hyprop Investments have been volatile in recent weeks as they have a large number of foreign shareholders, who have sold down their stock as political uncertainty heightened.