The SA listed property sector delivered a total return of -2.11% for the month of September vs. -3.61% for general equities, -2.09% for bonds and +0.45% for cash. On a year to date basis the sector delivered a total return of 5% outperforming general equities -5.4% but lagged bonds marginally by 1bp.

Direct property fundamentals continue to improve as the economic recovery takes hold. The retail sector currently offers the best pros-pects and has proved to be the most defensive followed by industrial and offices.

Over the short term concerns over rising inflation will continue to weigh on the both the bond market and property market and as such we remain cautiously optimistic on returns for the rest of the year.

Over the medium to long term, better economic growth and moderate inflation bode well for listed property and as such we expect the sector to deliver total returns in excess of inflation over the next three years.

The SA listed property sector delivered another month of positive returns in June. The sectors total return for the month was 1.17% vs. -2.15% for general equities, +0.16% for bonds and +0.49% for cash. On a year to date basis the sector has delivered a total return of 2.68% outperforming general equities +0.49% and bonds +2.30%.

Direct property fundamentals continue to improve as the economic recovery takes hold. The retail sector currently offers the best pros-pects and has proved to be the most defensive followed by industrial and offices.

Over the short term concerns over rising inflation will continue to weigh on the both the bond market and property market and as such we remain cautiously optimistic on returns for the rest of the year.
Over the medium to long term, better economic growth and moderate inflation bode well for listed property and as such we expect the sector to deliver total returns in excess of inflation over the next three years.

The SA listed property index delivered a total return of 3.35% for the month of March 2011 outperforming the other asset classes. Over the month the All Share index returned +0.52%, bonds +0.49% and cash +0.48%.

Listed property returns and interest rates have a strong correlation over the short term and as such we have seen the continued influence of a weaker bond market on the sector. The long bond yield has shifted up by 61bp since the beginning of the year and has consequently caused listed property yields to rise as well. This increase in yields explains the -2.16% total return the sector recorded up to the end of March 2011. Global concern over rising inflation will continue to weigh on the both the bond market and property market over the short term.

Over the medium to long term the high initial yields of 8%-9% offered by stocks in the sector coupled with expected distribution growth of 5%-6% should provide investors average total returns of 13% to 15% over the next three years.

The FTSE/JSE Listed Property Total Return Index was up 2.23% for the month of December 2010, up 3.13% for 3 months, up 15.84% for 9 months. The SA Listed Property sector outperformed all asset classes delivering 29.62%, against 20.90% for the All Share Index, 15.30% for Bonds and 7.8% for Cash.

Outlook for the property sector in 2011
The rally in the listed property market in 2010 was fuelled by a decline in bond yields given the strong correlation between the two. Yields on the 10 year have fallen considerably on the back of investor appetite for Emerging Markets ("EM") sentiment. United States ("US") economic fundamentals are improving at the moment and there is the likelihood that the Federal Bank of the US might increase rates in the second half of the year, in which case we could a reversal of inflows out of bonds from the US and EM into equities which will cause the local listed property market to de-rate in line with the weakening bonds yields. The operational concern going into 2011 is the rising cost pressures that are likely to squeeze profit margins for tenants and constrain rental growth for the landlords. Main drivers of escalating costs in the past were electricity tariffs and rates. Electricity tariffs are expected to increase by 25% per annum over the next 3 years, which will constitute 37% of total cost in the next 3 years from 27%.Administered costs i.e. electric-ity, rates and taxes, and other municipal charges constitute 54% of total operating costs.

Sector Fundamentals

Retail - Retailers margins, and consequently vacancies and rentals, may come under pressure because of cost pressures and rental growth will be subdued.

Office - The office sector was the hardest hit in the past year, with vacancy rates in decentralized office markets rising sharply on the back of excess supply. SAPOA recorded office vacancy of 9.73% for 2010, however this rate does not account for pockets of underutilized space which will place a drag on net absorption generated in the near term and impact negatively on rental growth.

Industrial - Industrial property suffered through 2010, partly due to weak export volumes and tighter access to credit but recent signs show an improved outlook.

Outlook for 2011 - Meago's expected total return for the sector for the next twelve months is anticipated at 11% comprising a clean forward yield of 8% and capital growth of 3%