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How low can SA property stocks go?

Listed property seems to be losing its lustre.

The year has kicked off with SA’s listed property sector in the doldrums – with the heavy sell-off of individual stocks now nearing a third month.  

Listed property, which over the past ten years has been a firm favourite among punters for outperforming equities, bonds and cash– is seemingly losing its lustre.

The sector emerged as a top performer in 2015 with FTSE/JSE SA Listed Property (Sapy) Index notching up a capital return of 8% (including dividends) –  albeit three times lower than the 2014 performance of 26.6%.

The sector was under pressure for the month of January, delivering a negative total return of 2.98%, latest figures from Catalyst Fund Managers show. Listed property lagged behind the positive returns of bonds (4.57%) and cash (0.52%). While equities (the JSE All Share Index), also delivered a negative total return of 2.99%.

Not only has the more than R400 billion sector slowed down but a bevy of stocks have also been battered. So far this year, the share price of blue-chip counters Hyprop Investments, Redefine Properties and Growthpoint Properties have fallen by 20.62%, 16.38% and 14.65% respectively (at the time of writing).  

Other property stocks have followed suit: 

Property stocks

 

Company

Year to date share price movement (-)

Freedom Property Fund

30%

Attacq Limited

28.39%

Pivotal Property Fund

27.99%

Dipula B shares

26.76%

Ascension A shares

20.37%

Arrowhead A shares

18.90%

Arrowhead B shares

17.46%

Delta Property Fund

18.79%

Vukile Property Fund

16.05%

Rebosis Property Fund

15.98

Dipula A shares

14.89%

Octodec Investments

14.63%

Safari Investments

14.29%

Tower Property Fund

12.56%

SA Corporate Real Estate Fund

10.65%

Emira Property Fund

8.30%

Indluplace Properties

7.73%

Stor-Age

7.22%

Synergy Income B shares

6.54%

Fairvest Property Holdings

6.47%

Hospitality A shares

4.50%

Balwin Properties

2.86%

   

Share price movements were quoted at 12:10, February 12.

The 40-odd real estate counters on the JSE that have been hardest hit have property investments and earnings that are exposed to South Africa. But companies hedging their bets offshore are faring much better, as their rand hedge status insulates earnings from the weakness of the rand. Read more here.  

Says Grindrod Asset Management chief investment officer Ian Anderson: “Domestic investors have been rotating out of SA-only property companies into property companies with most or all of their assets offshore.”

Anderson says because of the local challenges listed property is up against, offshore property stocks are trading at significant premiums to the underlying value of their property portfolio.

“The opposite is true for most of the SA-only property companies. In fact, some of the medium- and smaller-sized listed property companies are trading at discounts to net asset value in excess of 20% and forward income yields in excess of 12%,” he tells Moneyweb.

Industry players believe that foreign investors have been behind the sell-down of property stocks. Momentum Asset Management head of property investments Nesi Chetty, says the historic ownership of SA’s listed property has been around 12% to 13% but has reduced to below 8% in 2016. “Foreigners have been concerned about the country’s risks,” he adds.  

A recent SBG Securities report shows that the real estate sector enjoyed the largest net foreign flows of any sector during 2015 to the tune of R18 billion. But in January, the sector reversed the 2015 trend, as it saw net foreign outflows of R0.5 billion.

In this arguably precarious environment, asset managers are now discerning about finding value in listed property. Anderson says Grindrod still sees significant long-term value in SA-focused property companies who can still deliver double-digit income yields and inflation-beating income and capital growth.

A rebound of property stock might be in sight, says Nesi. “We have probably seen the worst of the bond yield sell-off and don’t expect listed property to sell-off much further.”

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The whole index is down so compared to that the property stocks have not done so badly. I prefer some of the stocks on EasyStockPicker.co.za though: better PE Ratios and trends.

The fall will be swift when it starts. The ‘crisis’ that started in 2008 and still continues is not reflected in SA listed property shares.

I would love to know how Freedom Property Fund did 30% when it listed at R1.00 and is now R0.14? These people were on Debt Rescue and what has happened to the poor pensioners money that was promised back to them in 2013?

Pulling the negative into the table header and then showing everything as positive creates confusion. Poor data presentation…

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