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