Real Estate Investor Magazine South Africa July 2014 | Page 46

LISTED

BY MALCOLM HORNE

Listed Property
Time To Look Offshore

T

here is no doubt that 2013 was an actionpacked year for South Africa’s listed property
sector, characterised by acquisitions, new
listings and capital raisings totaling a staggering
R18 billion. However, as yields on long-term
government bonds softened by 115 basis points
(bps) to end the year at 7.9%, the historic rolled yield
for listed property as a sector weakened by 31 bps to
6.9%, pushing the trading premium of listed property
to bonds to 104 bps.
SA listed property still posted a respectable total
return of over 8% for 2013, outperforming both bonds
(0.64% total returns) and cash (5.2% total returns).
Nevertheless, these returns - strongly driven by income
yields - left investors disappointed, given the returns of
more than 30% delivered by the sector in 2012, as well
as the Alsi’s solid average total return of over 21% in
2013. Capital returns, largely wiped out by weakening
capital markets, also disappointed.

Will 2014 bring better returns?
Forecasts suggest that distribution growth in 2014
will remain reasonable, with above-inflation income
distributions. A key short-term risk, however, is the
continued slowing of capital markets, especially as
the US Federal Reserve tapers its Quantitative Easing
(QE) Program, which is expected to be completely
wound up by the end of 2014. As investors in the SA
listed property sector saw in 2013, capital market
volatility significantly impacts property returns.
Overa l l, the forecast for SA listed propert y
in the short-term is cautious based on capital
market f luctuations, challenging property market
fundamentals and the premium yield spread on liste