JSE-listed property is trading at record highs after a solid performance in November, but analysts are divided on whether there is value still to be found in the sector.
Ian Anderson, chief investment officer at Grindrod Asset Management, said property finished November on a high, gaining 1.8% in the final week and, for the month, the sector gained 6.7%, comfortably outperforming both the equity (2.6%) and bond (0.9%) markets.
Anderson said recent company results backed the stock-price performance.
At the end of November, the listed property sector was trading on a forward yield of 6.7%, which is in line with the yield on the R208 government bond (maturing in 2021).
Anderson said listed property distribution growth is expected to average between 6% and 8% a year over the next three to five years, suggesting there is significantly more value in the listed property sector than in the South African bond market.
However, John Rainier, property analyst at value asset manager RE:CM, said JSE-listed property is over-priced. He said the sector is trading at a premium of about 45% compared with the reported net asset value of underlying property values.
"The sector is more expensive than it has been for a number of years and there is no margin of safety to offer investors protection from a permanent loss of capital," Rainier said.
He said listed property dividend yields are closely correlated to long bond yields in South Africa.
"Long bonds are more expensive than ever before, and property yields were last at these levels in the run-up to the financial crisis that dominated the world economy," he added.
Evan Jankelowitz of Sesfikile Capital said there were still long-term opportunities for patient investors.
"In the short term the price is still very dependent on bond yields," Jankelowitz said. "Investors should approach the sector with an appreciation for the potential near-term volatility. The sector will grow but it will not necessarily be a smooth ride," he said.
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