Listed Property continues its good form: According to Catalyst, SA Listed Property, as an asset class, has recorded the highest total return for the last 12 months (14.73%); in July listed property recorded the highest total return (+ 1.60%) of the four traditional asset classes with Bonds (1.42%) and Cash (0.44%) were next best performing asset classes for the month, whilst general equities recorded a total negative return of -1.99%.
Concerns about a Greek sovereign debt default, Eurozone sovereign debt contagion, the impact of a US sovereign credit rating downgrade and uncertain global growth is resulting in increased uncertainty over the future global macro-economic outlook. Financial markets were abuzz with news of US loosing nearly $3.3 trillion dollars over the last 7 days, reminiscent of 2008 credit crunch shares dump. It is interesting whether the state will again intervene given downgrading of its sovereign debt in the midst of the eurozone sovereign debt crisis. An even intriguing question is what impact this will have on companies looking to list on the stock exchange?
To listed property pundits and proponents the announcement by Old Mutual to cancel the listing of its Triangle fund no doubt comes as somewhat of a shock, what with the scope or increasing the sectors market capitalization and potential investor choice
Uncertainty in local and global capital markets will contribute to listed property share price volatility. Like bonds, listed property share prices are inversely related to the movement in listed property income yields. Listed property income yields are highly correlated to other fixed income yields, especially in the short term.
So in a nutshell, the major risk to total returns in the short term is a further weakening in capital markets. Listed property is a long term investment and over the long term the total return from listed property will be driven by the income yield plus growth in that income. There are perhaps other reasons why Old Mutual is reconsidering the listing aside from these given macro concerns; no doubt time will tell.