Listed property finally wipes out discount

04-04-2003

Listed property has finally wiped out its undervalued status relative to directly-held property. This property class is now on average trading at a small premium relative to non-listed property, which should lead to more listings of directly-held property in the listed property sector.

Rode & Associates’ latest review of the property market, Rode's Report, shows that listed property was about 5% overvalued relative to correctly-valued, directly-held property at the end of 2002.

This follows a consistent narrowing of the value gap over the previous three quarters, as investors’ appetite for listed property as a “secure” investment grew, says Rode’s Report editor Dirk De Vynck.

"Our analysis shows that property unit trust (PUT) yields have been converging with leaseback capitalization rates in quarter 2002:4. The drop in the income yield of PUTs follows a similar decline in long-bond yields over the same period, again showing the close correlation that has existed between the yields of listed property and bonds since 1998.

"The closing of the value gap should further heighten the activity in an already budding listed property sector, creating the ideal climate for a flurry of new property listings."