South African-focused listed property stocks are offering the most value in 20 years, says a prominent fund manager.

Chief investment officer at Bridge Fund Managers, Ian Anderson, said he had been surprised how badly the SA listed property stocks had performed since Cyril Ramaphosa’s victory at the ANC’s elective conference in December. But this meant there was still value in many domestic stocks, he said.

“The banks, retailers and life companies all rerated substantially but the SA-focused listed property companies have actually derated since the middle of December. Initial income yields on these stocks are now significantly higher than the yield on government’s R186 bond, which means they offer substantial long-term value,” he said.

He said it was unfortunate that the listed property sector had been caught up in the contagion related to the Resilient group of real estate companies.

Resilient and its associate firms had been trading at large premiums to net asset value for a few years. These were unrealistic and were being unwound, according to Anderson.

“As a result, the South African-focused listed property companies now offer the most value in 20 years. In 1998, SA listed property was yielding in excess of 20% following the Russian rouble devaluation and the Asian debt crisis and presented investors with the buying opportunity of a lifetime. We now appear to be in a similar position,” he said.

Anchor Stockbrokers research head Craig Smith agreed South African-focused real estate groups were set to rebound in 2018. “I think that’s definitely on the cards, given valuations, especially if there is continued uptick in business and consumer confidences.”

The FTSE-JSE South African property index actually closed 7.53% up to 601.67 points on Wednesday, tracing back the substantial losses it has made this year as many Resilient group stocks’ prices rose.

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