Listed property beats other asset classes

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The listed property sector's performance was also boosted by its fundamentals remaining "fairly" good, notwithstanding a weaker South African economy.

Stanlib listed property funds head Keillen Ndlovu says the sector also benefited from lower-than anticipated bond yields. When bond yields fall, listed property prices go up. "An increased appetite for listed property, including from balanced funds and other nontraditional property funds, also contributed to its successful performance," he says.

Despite tough macro conditions, listed property compared favourably with South African equities and bonds which delivered returns of about 10% and cash returned 5.90%.

Outperforming equities, bonds and cash

Avior Capital Markets listed property head Naeem Tilley says South African listed property has also comfortably outperformed all three other asset classes over 10, five and three years.

This is also the sixth time in the past 10 years it has outperformed equities, bonds and cash.

South African Real Estate Investment Trust (Reit) Association chairman Laurence Rapp says: "Listed property exceeded market expectations in 2014, despite tough operating environment, to produce capital returns of 18.59% and income returns of 8.05%."

South African Reits also performed well when stacked up against global Reit markets, according to Avior. They outperformed the UK (25.3%), developed Europe (20.4%) and Asia (10%).

Tilley says that the US was the best performing market with a 43.2% total return, or 30.4% in dollars. Next best, just beating SA, was Australia at 27.9%.

Curwin Rittles of Catalyst Fund Managers reports the local sector's trio of top-performing stocks were Fortress B (100%), Rockcastle (82%) and Resilient (60%).

He says "better" cost management and the restructuring of debt were important performance growth factors for the sector.

Grindrod Asset Management chief investment officer Ian Anderson says: "Last year marked another exceptional year for SA's listed property sector. On top of producing a 26.6% total return for investors - measured by the SA Listed Property Index - companies raised a record level of new equity capital, with SA Reits raising more than R33bn through a combination of initial public offerings, issues of shares for cash to fund growth and dividend reinvestment plans."

Ndlovu estimates the capital raised in the listed property sector to be about R40bn, compared to R18bn in 2013, making it a record year. "Virtually all equity raisings were oversubscribed. This indicates the huge appetite for listed property stocks," says Ndlovu.

Anderson says investor appetite for listed property has grown on the back of accelerating distribution growth despite a weak economic backdrop, the prospect of lower interest rates and yields for longer and the inclusion of SA's listed property firms in a number of global indices tracked by fund managers throughout the world.