The SA Listed Property sector has delivered 4.29% total returns (income and capital) so far this year to the 8 December 2016. Bonds were the best performer this year with 14.96% returns. Equities and Cash achieved 2.39% and 6.92%, respectively.
2016 was another busy year for listings and property transactions. New listings include Liberty Two Degrees, Spear Properties, Transcend Residential Property Fund, GTC Group, Echo Polska Properties and Hammerson. We may also see a student housing fund list in early 2017. Equity raised from some of the newly listed entities as well as existing property stocks in 2016 amounts to R32bn, so far. This compares to R36bn raised in 2015.
Offshore exposure now makes up about 40% of the SA Listed Property Index, which is basically the top 20 listed property stocks, and about 50% of all property stocks listed on the JSE. There are now 52 property stocks to choose from on the JSE, although not all are REITs. There is a huge divergence in terms of yield and income growth prospects. This could create room for consolidation going forward.
We forecast about 8% distribution growth from the sector over the next year. The average forward yield is around 7% and this goes up to 7.5% if 100%-offshore property stocks like NEPI and Rockcastle are excluded. Currency movements will continue to play a bigger role in determining total returns given the sector's sizeable offshore exposure.