“W

Finweek English Edition - - INVESTMENT -

hy buy property and end up wor­ry­ing about main­te­nance and coll e c t i ng r ent f r om dodgy ten­ants when you can just buy listed-property shares and let some­one else do the wor­ry­ing for you?”

That was a ques­tion put to me by an ac­quain­tance a few years ago while we were dis­cussing the pros and cons of in­vest­ing in bricks and mor­tar. It was a fair ques­tion and one that I hadn’t con­sid­ered care­fully enough given that, at the time, res­i­den­tial property was the prover­bial ‘ in thing’. Ev­ery­one was pil­ing into the ‘ buy-to-let’ mar­ket with two bed, two bath f lats in the North­ern sub­urbs of Jo­han­nes­burg, rack­ing up an­nual price gains of be­tween 20% and 30%. Of course, that in it­self should have been a warn­ing sign. Af­ter all, sea­soned in­vestors will tell you that when your hair­dresser starts giv­ing you in­vest­ment ad­vice, it’s time to sell out of what­ever it is they’re buy­ing.

It wasn’t long af­ter my con­ver­sa­tion when the res­i­den­tial property sec­tor took a hit thanks to the 2008 f inan­cial cri­sis, leav­ing many a would-be Don­ald Trump lick­ing his wounds. In the en­su­ing aftermath, in­ter­est rates were even­tu­ally cut to mul­ti­decade lows in an ef­fort to prop up the fal­ter­ing econ­omy. The re­sult was a boon for listed property, which has en­joyed a re­mark­able run in the last few years, rack­ing up re­turns of al­most 20% in the last five years.

This boom- and­bust tale also serves as the ideal tem­plate from which to ex­plain the over­all work­ings of the listed-property sec­tor. Much like bonds,

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