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SA property stocks shine

Jan 10 2017 17:19
Lameez Omarjee

Johannesburg – Local property stocks have recently improved their future return prospects.

This is according to the quarterly economic review published by analysts Sanisha Packirisamy and Herman van Papendorp of Momentum Investments (MMI).

The improvements come off the back of an improved domestic bond market outlook and better domestic growth performance, the report stated.

However MMI is still taking a cautious view on the 2017 outlook for property stocks, Packirisamy explained in an emailed response to Fin24.

Growth prospects remain subdued in the face of consumer headwinds due to a poor jobs outlook, high levels of indebtedness and a potential for higher taxes. She added that political uncertainty remains ahead of the ANC National Executive Committee in December which will hamper private fixed investment.

“Muted growth expected in SA in 2017 is unlikely to mop up the net addition of property developments completed during 2016 as well as those earmarked for completion during this year and next” added Packirisamy.

A market update by Anchor Securities indicates that recent gains by South African property stocks placed the markets on a firmer footing.

Particularly gains by Octodec Investments, Redefine Properties and Growthpoint Properties at 6%, 2.3% and 1.6% respectively.

According to the MMI report, listed property was the second best performer among domestic asset classes, returning 1.3%, during the fourth quarter of 2016.

South African property stocks over the past year also happened to outperform dual listed property stocks in the UK.

According to data from iNet BFA European developer Hammerson was down 21.10% over the past year, and Intu Properties which is largely focused on shopping centres was down by 24.58%.

UK property stocks declined sharply following Brexit.

READ: The UK listed property market after Brexit

This compared to Growthpoint Properties which is up 3.74% over the past year. Redefine Properties was also up 2.05%. Resilient Property Income Fund (REIT) made the biggest improvement over the past year, up 4.67%.

However, Packirisamy said this does not necessarily mean foreign investors would look to these local stocks for future prospects.

“Our property analysts suggest that domestic risks such as the lingering downgrade risk and ongoing political tensions) could drive the interest of SA property funds into offshore markets,” she said. These being Poland, Czech Republic, Hungary, Romania and Slovakia as they offer better growth prospects.

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