Roy Cokayne

Listed property last month posted higher returns than the JSE all share index for the sixth consecutive month but was overshadowed by the performance of the bond market.

The Property Loan Stock Association of SA (PLSA) reported yesterday that the listed property sector achieved an overall monthly return of 2.6 percent last month, which was up from the 1.4 percent return achieved in July. By comparison, the all share index last month achieved a return of minus 1.8 percent. However, the all bond index reported a 7.4 percent return in August.

Property loan stocks, which form part of the listed property sector, posted a return of 2.5 percent last month compared with 1.3 percent in July.

There has been a steady resurgence of listed property prices since March after losing 7 percent in total returns between January and mid-March due to the negative impact of inflationary risks at the beginning of the year on all interest-rate sensitive asset classes.

Norbert Sasse, the chairman of the PLSA, said the returns of listed property overall easily outpaced inflation, which meant the sector was a good hedge against inflation. Sasse, who is the chief executive of Growthpoint Properties, said the listed property sector was fast approaching R140 billion in market capitalisation and the PLSA expected the sector to continue growing in the long term.

The highest return in the listed property sector last month was achieved by property loan stock Fortress B, with a return of 17.6 percent. It also posted the best year-to-date performance to last month, with a 51.5 percent return.

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

Keillen Ndlovu, the head of property funds for Stanlib, said in a blog for the PLSA website that eight listed property companies, representing about 60 percent of the listed property sector on the JSE, released annual financial results last month and posted a weighted average income growth of 6.8 percent.

Ndlovu said this was not bad compared with the average inflation rate of 4 percent, although there were some notable disappointments, such as Hyprop’s lower-than-expected income growth and Emira forecasting negative income growth.

He added that there was a general downward trend in overall vacancies across the portfolios reporting and the retail sector, especially the larger shopping centres, continued to do better than other sectors.

“The retail sector, and particularly bigger shopping centres, continues to outperform the office and hospitality sectors, which are still feeling the effects of a weaker economy and oversupply,” he said.

However, Ndlovu stressed there were still some major risks to note and at macro level, slower economic growth and rising bond yields were a concern for asset managers, while steep increases in operating costs, particularly utilities and taxes, were making it difficult for landlords to negotiate better rentals with tenants.

Ndlovu said Stanlib was forecasting a slowdown in income growth to about 5.5 percent for the coming year with an 8.4 percent forward yield for the listed property sector, which was likely to be better than cash and bonds.