Listed property not too moved

SA’s listed property stocks had a relatively subdued reaction to the downgrade by S&P Global Ratings and the dismissal of Pravin Gordhan as finance minister and Mcebisi Jonas as his deputy.

SA’s listed property stocks have had a relatively subdued reaction to the downgrade by S&P Global Ratings and the dismissal of Pravin Gordhan as finance minister and Mcebisi Jonas as his deputy.

Analysts have said that while listed property prices had held up in general, they might feel pain in coming weeks.

Two of the largest listed property groups have only experienced gradual shareprice falls. The share price of the largest locally listed property company, Growthpoint Properties, has fallen 3.81% over the past week. It closed 0.71% lower at R25.07 on Thursday. The price of another large real estate group, Redefine Properties, has fallen 3.67% over the past week. It closed 0.09% lower on Thursday at R10.74.

The FTSE/JSE South African Listed Property index (SAPY) fell 1.78% on Thursday. This meant it was 1.96% lower for the week so far. It lost 3.17% last week and has effectively fallen only 2.63% lower this year to date.

This is while bond prices had also weakened. By the end of Thursday, the R186 yield was 1.7% higher for the week and only 0.9% higher for the year.

Historically, listed property performance has tracked the bonds’ performance, but that correlation had started to lessen, partly because South African listed property counters had gained offshore exposure.

“I have been surprised how well South African property has held up considering events. Adverse economic growth is, of course, bad for property. However, like other equity sectors, the South African listed property sector is already fairly globalised so it is not a purely South African story and does not react only to South African events,” said Evan Robins, listed property manager of Old Mutual Investment Group’s MacroSolutions.

Craig Smith, head of research at Anchor Stockbrokers, said the correlation between listed property and bonds was still prevalent. “It has still been fairly strong but obviously increased offshore exposure over the last few years distorts comparison.”

“A ratings downgrade is most certainly not good for local property, which has historically had a strong correlation with South African government bonds,” he said.

Chloe Ma of Stanlib said the ratings downgrade “and political uncertainty has caused the South African bond yields to weaken rapidly”.