Listed property has delivered its worst performance in a decade and fund managers do not expect the sector, which has been a reliable investment for several years, to gain much momentum before 2019.

The FTSE-JSE South African Listed Property Index (Sapy) has suffered a negative total return of 18.1% so far in 2018, according to Anchor Stockbrokers. This was according to research up to the end of June 8. Total returns include capital appreciation and dividend growth.

So far in 2018 equities have lost 0.8% and bonds and cash have returned 2.4% and 3.2%, respectively. South African listed property has also performed worse than all other major listed property markets in the world.

UK and US listed property managed a total return of 6.2% and 4.4%, respectively, while Europe, excluding the UK, returned 6.3% and Australia achieved a 2.2% total return.

Listed real estate accounts for about 7% of the JSE and is worth about R720bn.

The negative 18.1% return is poor but not as severe as the 37% decrease in the sector’s returns between November 2007 and June 2008 just before the global economic crisis.

It clawed back some gains during the rest of 2008 ending that year with a negative 4.47% total return.

"It’s been a bad year for South African listed property but not all the stocks within the sector have performed that poorly. We need to bear in mind that the Sapy has largely been held back by the severe share price losses suffered by Resilient and companies associated with it," says Evan Robins, the listed property manager of Old Mutual Investment Group’s MacroSolutions boutique.

Resilient, Fortress, Nepi Rockcastle and Greenbay Properties’ stocks have all lost significant value in the first five months of 2018, with fund managers not expecting them to recover quickly.

Resilient recorded a negative total return of 56.44% in the first five months of 2018, while Fortress’s main B shares delivered a negative total return of 62.82%, according to a report by Catalyst Fund Managers.

Greenbay recorded a negative total return of 44.4% and Nepi Rockcastle a negative 40.08% over the same period.

The head of listed property funds at Stanlib, Keillen Ndlovu, says listed property was hurt by these losses and is also being rattled by persistent weak market conditions. "It’s been a tough year so far for the listed property sector. Most of the negative returns came from the big fall in the Resilient stable of companies’ share prices. The stable made [up] over 40% of the SA listed property index and have now fallen to less than 30%. The stronger rand, for most of this year, added to the losses," he says.

Offshore exposure made up more than 40% of the Sapy index but it has fallen about 35% and, as a result, local-focused firms have outperformed their offshore focused peers.

The likes of Fairvest, which owns shopping centres in lower income areas, mustered a total return of 24.37%, making it the best performer for 2018 so far, while residential group Transcend achieved 21.58%.

Rebosis Property Fund delivered a total return of 20.62% and diversified group Emira Property Fund has experienced a turnaround with a total return of 19.7%.

Ndlovu says local fundamentals and GDP growth continue to be weak, which is not giving momentum to South African listed real estate.

But the sector still contains real estate investment trusts that have to pay dividends on a regular basis.

"We are forecasting income growth of 5.5% to 6% for the overall sector and this results in a forward yield of about 8.5%. We believe we have seen the most of the volatility and we are forecasting positive total returns over the next year, obviously off a lower base," he says.

Ian Anderson of Bridge Fund Managers says that investors need to pick stocks carefully in a volatile environment.