News Column

SA listed property to keep an eye on interest rates

January 25, 2014

South Africa's listed property sector can expect another interesting year in 2014, according to Redefine Properties chief executive Marc Wainer , who predicts interest rates will be one of the most important underlying forces for the sector. "The direction interest rates take could have a dramatic impact on the prices of listed property stocks and ultimately the yields at which properties trade," he said. He cautioned that this year could be a volatile year for pricing in the listed property sector, given the uncertainty about the effects of quantitative easing, as the US Federal Reserve's policy was still unknown, and the impact it would have on bond yields uncertain. "However, there still appears to be strong appetite from investors and from the bond market for South African property stocks," said Wainer. But he said the biggest threat to the South African economy was the potential of a downgrade of sovereign risk. "Should this happen, there will be a massive sell-off of South African bonds by international investors. "The repercussions for the South African economy, the listed property sector included, could be dire," said Wainer. When it came to levels of activity in the listed property sector, Wainer believes |property acquisitions and developments would be slow in 2014. "We can expect some consolidation between smaller funds as well as a few more listings, particularly those with an international flavour." Looking at property market fundamentals, Wainer predicted that retail property would continue to outperform other sub-sectors thanks to the continuing strong demand for space from local and international retailers. On the other hand, an oversupply of offices would mean further underperformance from this sub-sector. Wainer said the listed property sector would also continue to identify new opportunities in 2014. "Increasingly, South African property companies look for ways to diversify their investments into sub-Saharan Africa or other offshore jurisdictions. "The yields available are better than in South Africa and there's strong demand from investors for counters offering a rand hedge component," Wainer said. "Not only will the listed sector consider new territories, but also new investment categories," he added. Weekend Argus

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Weekend Argus (South Africa)

Story Tools