Bitcoin outdoes Property but its future is unknown

Although Bitcoin looks very appetizing, property remains a viable asset class in which to invest and still forms one of the most important investment cornerstones for many, says Ortneil Kutama.

Digital currencies like Bitcoin, are getting a lot of attention as a new asset class, but property remains solid for investment because of its defensive nature.

Bitcoin recently reached a whooping all-time high of R40 000 (USD $3000) early June, representing a year-to-date return of 200%. This is while listed property in South Africa managed a return of about 2.5% in the first six months of 2017.

Although Bitcoin looks very appetizing, property remains a viable asset class in which to invest and still forms one of the most important investment cornerstones for many, according to Ortneil Kutama, SA Commercial Prop News Media Director.

"With these wild price increases, digital currencies are gaining more attention and demand from traditional investors. Many people don't know that there are many different digital currencies. It is not clear which digital currency or currencies will be the most popular in the next few years," said Kutama

There are currently well over 800 crypto currencies. As a matter of fact, in June, the collective market capitalization of all digital currencies crossed USD $100 billion for the first time. Meanwhile South Africa’s listed property has grown steadily over the past 17 years and is worth about R600 billion (USD $44 billion).

Getting involved in digital currency investing can be very challenging for an ordinary investor. Getting involved in more than one digital currency at a time is even more complicated. As with most asset classes, diversification is a recommended approach for new investors to mitigate risk.

"You’ve probably heard of the legendary investor Warren Buffett, who says invest in what you know. Bitcoin and other crypto currencies are still very new concepts for many here in SA. But we’ve known a lot about property for quite a while," Kutama said.

Stock market investors generally diversify through mutual funds or index funds. These types of investment vehicles are not yet on the market for digital currencies, but I believe there will be strong demand for these types of products in the future.

Bitcoin may be the in-vogue investment of the current day but listed and direct property both have very strong fundamentals and good track records.

Kutama adds: "SA’s listed property sector continues to feed investor appetite, having raised about R153 billion between 2011 and 2016 or over 6 years.

The sector has outshone other equities, bonds, and cash for several years in SA. Only recently, money market instruments like bonds have challenged it.

JSE-listed offshore property stocks have been the best performing in the first six months of 2017, largely thanks to an economic recovery across the continent of Europe.

This is while various South African-based property groups have been negatively affected by a slowing local economy and political instability.

Greenbay Properties was the best performer with a total return of about 23.4%, on various acquisitions.

Greenbay’s initial plan was to invest in listed European property funds and distressed real estate assets. CEO Stephen Delport said he grew the Greenbay portfolio opportunistically, despite a volatile world economy.

Last year listed property did a 10% return while bonds did 14%. But 2017, so far has not been a good year for listed property.

The SA Listed Property Index (SAPY) recorded a total return of 0.29% for the month of June 2017 with the historic yield of the SAPY ending the month at 6.93%, 11 basis points higher than the 6.82% recorded the previous month.

Year to date, listed property has achieved a total return of 2.29% while cash and bonds have beaten it with 3.74% and 4.02% respectively. Equities also beat it with a 3.37% return according to Catalyst Fund Managers.