It appears that value chasers are climbing back into property stocks, with the South African listed property index recovering by 6% in the past 10 days. The sector has been under pressure since the end of October, following a spike in bond yields, the debacle around the axing of finance minister Nhlanhla Nene, and the weaker rand.
Last month, the likes of Hyprop Investments, Resilient and Growthpoint Properties were trading at 20%-30% below their 2015 peaks. That’s a value proposition that has not gone unnoticed by longer-term buy-and-hold investors. Two weeks ago, the sector as a whole was trading at a forward dividend yield of close to 8%, up from about 6.5% at the end of October.
The sector has also been buoyed by events on the corporate front. This month, three rand-hedge real estate companies are planning to raise up to R4.4bn in fresh capital among South African shareholders to help fund their growth ambitions. They are Redefine International (up to R3.5bn), Investec Australia Property Fund (R690m), and Schroder European Real Estate Investment Trust (R253m).
It will be interesting to see to what extent the market will support these book builds. Chances are they will all be oversubscribed, given the seemingly still strong appetite for rand-diversification opportunities. However, expect some continued see-sawing of property share prices in line with overall market volatility.
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