growth of between 7 % and 9 % per annum ), listed property should deliver total returns of between 15 % and 18 % per annum going forward . This is no different to the returns the sector produced in the last three years .
The final benefit of investing in listed properties in a balanced portfolio is that the returns from listed property are uncorrelated with the returns from the South African equity market . This implies that adding listed property to a balanced portfolio to replace some of the equity allocation would produce the same or a similar return , but with lower capital volatility .
Numerous studies have been conducted globally to lend support to this . Unfortunately the relatively small size od the listed property sector in South Africa means that most large fund managers are not able to allocate an optimal allocation to listed property . For that reason , most South African investors have had little or no exposure to the top performing asset class in South Africa over the last 10 years .
While the benefits described above are the absolute benefits of investing in listed property , there are also relative benefits ( i . e . rather invest in listed property than in direct property ). An investment in listed property typically does not require a significant capital outlay and investors can invest through a monthly debit order from as little as over R500 per
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month . Even a R500 investment will give the investor exposure to a high quality , diversified portfolio of commercial , industrial and retail assets tenanted by the countries top companies . Listed property is a far more liquid way of gaining exposure to commercial property . Whereas the sale of a building may take months to conclude , selling shares in a listed property company can be completed in a matter of minutes .
The cost of investing in listed property is significantly lower than investing in direct property , where brokers commissions can be high . Professionals undertake the management of the property portfolio and the investor is not required to undertake stressful negotiations with tenants when leases expire .
Listed property offers both absolute and relative benefits for investors looking for a high initial income yield , inflation-beating income and capital growth , and a cost-effective means of accessing a high quality , diversified portfolio of commercial property . The asset class is expected to continue growing in South Africa , both in terms of market capitalisation and importance in diversified multi-asset portfolios .
Given the current forward yield and inflationbeating income growth forecast in the medium and long-term , listed property in South Africa is expected to deliver returns in excess of 15 % per annum .
RESOURCES
Grindrod Asset Management
Commercial Handbook 2016 43