Listed Property up 4% in three weeks of trading
Despite a lacklustre economy, South Africa’s listed property has achieved a 30% share price appreciation over the past 12 months on the back of what appears to be an ongoing search for yield.
Figures from Grindrod Asset Management show that listed property sector has started 2013 by climbing 4% in just the first three weeks of trading. The sector climbed 0.60% during the week ending 25 January 2013, despite significant rand weakness and an increase in bond yields.
Analysts expect performance from property stocks for 2013, with total return forecasts ranging from 8% to 15%. Income payouts should grow by a moderate 5,7% on average this year, the low cost of capital will provide some counters with the opportunity to achieve above-average earnings growth through mergers and acquisitions.
There are also appealing opportunities in Africa that some players are planning to exploit. In addition, the retail sector, which accounts for 50% of the value of property stocks, is still in good shape.
Ian Anderson, Grindrod Asset Management Chief Investment Officer said that among the heavyweights, Resilient gained 2.7% and Hyprop rose 1.6%, while Growthpoint’s share price declined by 0.3%.
After the sector gained almost 36% last year, many fund managers and market commentators expect a pullback in prices this year. The most obvious catalyst for a pullback would be an increase in official interest rates. This appears unlikely this year, despite upward pressure on consumer inflation.
Investors need to be mindful of the introduction of Real Estate Investment Trust (REIT) legislation later this year, which could result in increased demand from foreign investors when the likes of Growthpoint, Redefine, Hyprop and Resilient make their way into global REIT indices for the first time.
The current income yield and future income growth prospects suggest the sector can deliver returns of between 12% and 15% per annum in the long-term. Short-term performance will be driven by increased/decreased demand for the asset class from foreign investors and large local institutions and the future direction of official interest rates in South Africa.
It appears investors have started to realise that the sector offers superior and more predictable returns than general equities. The strong run in listed property prices has been driven to a large extent by the strengthening in the bond market. Listed property yields have followed bond yields downwards. And lower yields mean higher unit prices.
Appetite has been further stimulated by a spate of new listings - eight property counters have made their JSE debut over the past 18 months. The fact that new property funds have all delivered on their prelisting earnings forecasts has no doubt boosted support for these funds.
Top 5 performers last week
Ascension B |
13.95% |
Arrowhead B |
4.96% |
Resilient |
2.65% |
Vunani Prop |
2.56% |
Arrowhead A |
2.25% |
Bottom 5 performers last week
Rebosis |
-0.43% |
Vukile |
-0.68% |
Capital |
-0.96% |
Premium |
-2.76% |
Ascension A |
-9.38% |
Source: Grindrod Asset Management