Commercial pips residential

Investors generally made more money on the listed, commercial property market in 2009 than on residential bricks and mortar, latest figures from industry players reveal. The JSE's real estate sector, which comprises 18 counters with a total market capitalisation of R103bn, delivered total capital growth of 6% in 2009. The sector, which invests mainly in shopping centres, offices and factories, last year offered investors an average income yield of around 8%.

That brings the total return (income and capital growth) for listed property to 14% for 2009, according to Catalyst Fund Managers. Listed property investors who were exposed to the sector's top five stocks would have earned a total return of at least 24% - Vukile Property Fund was the top performer for 2009 with a total return of 30,73%, followed by Capital Property Fund (29,75%), Premium Properties (28,9%), Pangbourne Properties (26,92%) and Redefine Properties (24,15%).

While share prices of property stocks continued to rise last year, house prices fell by an average -4% in 2009, according to latest figures from FNB. Meanwhile, property economists Rode & Associates places the gross income yield offered by two-bedroom flats at an average 9% for 2009. That means the total return delivered by residential property in 2009 comes to only 5% on average, which compares poorly to the 14% delivered by listed property over the same time.

The total return figure for residential property will, of course, vary depending on which bank's house price growth figures for 2009 are used in the calculation. But Standard Bank and Absa have yet to publish house price figures for the whole of 2009.

What should be of further interest to investors is that rentals in shopping centres, offices and factories were growing at a faster rate than that of residential buy-to-let properties last year. The listed property sector recorded an average income growth of around 8% (Catalyst Fund Managers) for 2009.

That compares to a far more moderate 2% on average for rental flats in the five major cities (Johannesburg, Pretoria, Cape Town, Durban and Port Elizabeth), according to Rode & Associates' data.

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