The Case For Listed Property

While there are plenty of short-term risks with listed property stocks, investment expert Simon Brown still includes this sector in his long-term portfolio. He explains why.

- Simon Brown

I have been buying listed property exchange-traded funds (ETFs) over the last year. So far, it has not been a rewarding investment as the listed property index is off just over 10% over the period. However, that is before dividends. Dividends have been chunky at around 9%. That means that, overall, one is down around 1%.

Over the same period, the Top40 is flat, excluding a dividend yield of some 3%.

I want to delve into why I like property, but also why I may be wrong, especially in the short term.

The bull case for property is fairly simple. One buys when the yield on property is above the ten-year government bond rate. This is currently around 8.1% and the sector is yielding over 9%, so that box gets ticked.

The second bull case is to buy into the sector when the price is around or below the net asset value (NAV) of the property stocks. Again, this is the current situation, so now we have both bull-case boxes ticked.