During the third quarter, the SAPY listed property index provided a 7.2% return, outperforming the All Share (-2.1%), the All Bond (2.2%) and General Retail (1.1%) indices. Listed property has delivered a 12-month return of 15.1%.

Listed property's performance during the quarter was driven primarily by growth in the rentals received and thus the dividends paid by the underlying companies. Many companies released results during the period. These were as good - or better - than expectations, with average double digit distribution per unit growth and no substantial company grew dividends by less than 8%. Guidance was for the rate of dividend growth to slow but to remain close to 8%. Property only rerated positively by 10 basis points against bonds.

It is encouraging that listed property funds have continued to produce this growth under challenging conditions. However, headwinds should temper these high growth rates in time, given a stubbornly sluggish economy, credit concerns in retail, tenants under stress and rising interest rates.

SAPY offers a 7.4% forward dividend yield (excluding Attacq) compared to 8.2% from the All Bond Index and 3.3% from the All Share Index.

The FTSE/JSE SA Listed Property Index (SAPY) provided a pleasing 4.4% total return over the quarter. This was lower than the FTSE/JSE All Share Index (ALSI)'s 7.2% and general retailers' 5.9%. In contrast, property outperformed the JSE All Bond Index (ALBI)'s 2.5% return. Property's yield improved only marginally relative to bonds, but benefited from the small fall in bond yields (property prices are more sensitive) and earnings growth. Over the past 12 months, listed property has provided a 6% total return compared to 5.4% from the ALBI.

There was no change in the trend of pleasing company results, even as operating conditions remain challenging. Corporate activity has not let up with new listings, rights issues and corporate action continuing.

Relative to bonds, property remains more expensive than it has been over the past few years and listed property prices continue to cheapen against equities. The sector benchmark should deliver a 7.7% forward dividend yield if we exclude Attacq, a constituent of the index which does not pay dividends. By comparison, the 10-year bond yield is 8.2% and the ALSI has a 3.0% forward dividend yield and a 6.2% forward earnings yield.

A March rebound allowed listed property to produce a total return of 1.8% for the first quarter of 2014. The rolling 12-month total return is the same. The quarterly return was weaker than the 4.3% delivered by the FTSE/JSE All Share Index (ALSI), but stronger than the All Bond Index (0.9%) and general retailers (1%). The return was positive - despite a headwind from bond yields which rose by 36 basis points (bps) - because of the running yield, good underlying rental growth and a modest beneficial re-rating against bonds.

The quarter's company results were almost uniformly positive. The average dividend was above 10% with forward guidance for similar growth. This is despite tough operating conditions. Some results were aided by currency gains in offshore holdings.

The anticipated wave of company consolidations is taking place rapidly. These will improve liquidity at the expense of choice.

Relative to bonds, property remains more expensive than it has been over the past few years. Compared with equities, property continues to cheapen. The sector benchmark has a 7.8% forward yield (excluding a non-dividend payer), compared with 8.3% on the 10-year bond.