Listed property falls 6% - is this the start of downtrend?
The JSE's listed property sector performance in 2014 was nothing short of excellent. The SAPY index notched up a total return of 26.6%.
Since then, the sector delivered strong growth of 17% for January and February. This was supported by lower bond yields and strong earnings posted by JSE-listed companies.
But with property down 6% in last month, is listed property's surging run slowly losing steam? Have investors run their course with property stocks?
Well, even with a slight dip, listed property will continue to bring in great profits. It remains a top local sector that rewards investors with fantastic dividends.
So, investors will definitely stick around and continue to find listed property attractive.
Let's see why…
There's still plenty of demand waiting in the pipeline for listed property
This is all thanks to strong demand for housing (especially low-cost, residential and student housing which I wrote about in December's issue of South African Investor), consistent performances from retail property and continuous local and offshore investment.
There are also new low-cost and big shopping centre developments thriving through South Africa such as the "Mall of Africa". And, listed property companies such as Attacq (JSE:ATT) are playing a big part in this.
Even, township and rural shopping centres continue to perform. Head of listed property funds at Stanlib, Keillen Ndlovu says these shopping centres "have benefited from high foot counts. The spend per head is lower than urban shopping centres, but this market is volume driven".
Resilient Property Income Fund has exposure into township and rural centres. But more and more companies are expanding the footprint in this market with Vukile Property Fund and Rebosis Property Fund joining in. Town such as Soweto, Khayelitsha, Ulundi, and other emerging towns continue to see inflows in retail developments.
Another major factor is the increased demand for residential property over the past two years, which has seen companies boost their earnings by charging higher rents. Even shopping centres boosted their earnings as consumers continue to shop regardless of the pressures on disposable income.
But the main factor to reassure the property market is the huge demand that still needs to be filled especially in the housing market and the expansion of new low-cost shopping centres.
But will listed property deliver the same returns in 2015 as it did in 2014?
With South Africa economy struggling to gain momentum on other fronts, listed property has so far shrugged off any challenges.
So, there's still plenty of upside if you find the right opportunities in individual property stocks – that's where the money lies.
Huge profits lie with individual property stocks
The strong run for listed property market was largely thanks to five companies: Fortress B (JSE:FFB), Rockcastle (JSE:ROC), Reslient (JSE:RES), Hyprop (JSE:HYP) and NEPI (JSE:NEP).
These top five performing stocks delivered a return exceeding 63% in 12 months.
Even now, when you look at individual property stocks, you can find plenty of upside to come, with double-digit returns for your portfolio.
There's always a place for one or two thriving listed property companies in your portfolio.
Always remember, "Knowledge brings you wealth"