Listed property sector steams forth
Listed property is going from strength to strength. The property trust sector has shown a growth of 42% over the past year compared with the all-share index showing of -27%.
The reason for this popularity, says Rode & Associates economist Dirk De Vynck, lies in the decreasing income yields of listed property, which are pushing up the capital value of listed property.
Property unit trusts (PUTs) property outperformed nearly all key SA investment classes in the past five years, with average total returns of more than 18%. Property stocks listed on the JSE Securities Exchange are showing income yields of about 12%.
“PUT income yields have been trending down since 1998 at the same rate as bond yields. As with bonds, lower yields are good news for listed property. Whether this will continue, depends on the rand and resultant inflationary view. A stronger rand means lower inflation expectations, resulting in lower bond yields and, as a consequence, lower PUT yields. Lower PUT yields translate into higher capital values, which is good news for the listed property sector’s prices.”
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