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Johannesburg - Property investors looking to enter the buy-to-let market should opt for the listed sector instead, say analysts.
The listed property counter has shown stellar performance over the last 10 months with a total return of 25.68%, compared to equities (8.69%), bonds (14.11%) and cash (5.28%).
But as market commentators debate whether this trend is likely to continue, property analyst Leon Allison at stockbroking firm Macquarie First South Securities said the counter will always appeal to diversified portfolios.
"Investing in a listed property company exposes you to blue-chip tenants and many properties as opposed to owning a flat or two with tenants who may or may not lose their jobs next month," said Allison.
The listed property sector currently offers a forward yield of about 8%.
FNB's home loans department reported in its Estate Agent Survey for the third quarter of 2010 that average gross yields on rental properties are dropping.
The group said the third quarter's 7.8% rental yields was "significantly lower" than the 7.9% in the second quarter of 2010.
Allison also said the costs and effort involved in buying, owning and selling a flat or house makes an investment in listed property less management-intensive and a cheaper option.
"Residential property is more expensive, more hassle and has lower liquidity," he said.
Whereas the purchase of physical property entails conveyance and transferring attorney costs as well as once-off bank fees and deeds office fees of up to R15 000, brokerage fees for shares typically cost less than 0.4% of the value of the buy transaction.
However, analysts agree the kind of investors who tend to buy a house or flat for investment often have different aims to those who own listed property shares.
These are investors willing to deal with broken geysers or maintenance issues for the security of a steady return in the form of monthly rent.
"It really depends on the investor," said Coronation Fund managers' Anton de Goede. "It's not a black or white issue – the listed property sector can offer higher returns, but it's more volatile," he said.
According to the FNB report, buy-to-let purchasing is at a record low of 7% of total property purchases.
- Fin24.com
The listed property counter has shown stellar performance over the last 10 months with a total return of 25.68%, compared to equities (8.69%), bonds (14.11%) and cash (5.28%).
But as market commentators debate whether this trend is likely to continue, property analyst Leon Allison at stockbroking firm Macquarie First South Securities said the counter will always appeal to diversified portfolios.
"Investing in a listed property company exposes you to blue-chip tenants and many properties as opposed to owning a flat or two with tenants who may or may not lose their jobs next month," said Allison.
The listed property sector currently offers a forward yield of about 8%.
FNB's home loans department reported in its Estate Agent Survey for the third quarter of 2010 that average gross yields on rental properties are dropping.
The group said the third quarter's 7.8% rental yields was "significantly lower" than the 7.9% in the second quarter of 2010.
Allison also said the costs and effort involved in buying, owning and selling a flat or house makes an investment in listed property less management-intensive and a cheaper option.
"Residential property is more expensive, more hassle and has lower liquidity," he said.
Whereas the purchase of physical property entails conveyance and transferring attorney costs as well as once-off bank fees and deeds office fees of up to R15 000, brokerage fees for shares typically cost less than 0.4% of the value of the buy transaction.
However, analysts agree the kind of investors who tend to buy a house or flat for investment often have different aims to those who own listed property shares.
These are investors willing to deal with broken geysers or maintenance issues for the security of a steady return in the form of monthly rent.
"It really depends on the investor," said Coronation Fund managers' Anton de Goede. "It's not a black or white issue – the listed property sector can offer higher returns, but it's more volatile," he said.
According to the FNB report, buy-to-let purchasing is at a record low of 7% of total property purchases.
- Fin24.com
