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Spreadsheet Ranger

What property ETF to buy?

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I am looking to add property to my portfolio again, in the past I owned PTXTEN, the TER on that ETF is 0.54% vs 0.25% for the Sygnia itrix global property ETF.

 

What is the best property ETF to own going into 2019 for the next 10 years.

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Posted (edited)

Global property returns are always significantly less than local property returns (see table below). Since property ETFs are supposed to primarily produce income, I'd automatically remove GLPROP and SYGP from the list (these two I'd add if you specifically want diversification in the global section of your portfolio, but as an income earner main property ETF, the returns on these two aren't great compared to local property, even taking into account the average annual 4% Rand depreciation. ie. even with the 4% annual drop in the Rand taken into account, these indices consistently perform at roughly 3% lower than local property ETFs.

 

I personally don't like PTXSPY and STPROP because these are uncapped and are heavily weighted in favour of three companies - they each have 50% of the total ETF in just Growthpoint, Redefine and Nepi Rockcastle. That being said, PTXSPY was the best performer of the six for the past year in terms of yield, but was the worst performer in terms of growth, due to the higher weighting of the big three. STXPRO and PTXTEN are both capped at 10% in any one company, which is a major plus in my opinion.

 

The difference between STXPRO and PTXTEN is that PTXTEN is made up of the top 10 companies, each making up 10% of the ETF (equally weighted). On the other hand, STXPRO is made up of 15 companies at the moment, weighted by market capitalization, with a maximum of 10% in any one company.

 

The difference in performance in earnings yield from PTXTEN is roughly 2% higher than from STXPRO. For the past year, the distribution yield from PTXTEN was 8.57%, whereas from STXPRO, it was 6.45%. This extra 2% makes a huge difference, and more than offsets the higher TER.

 

The current income yields for the six you mentioned are as follows:

 

PTXSPY:   9.00%

PTXTEN:   8.57%

STPROP:   8.45%

STXPRO:   6.45%

GLPROP:   2.76%

SYGP:        1.99%

 

The growth from the four is pretty similar (graph below), so I'd say you should choose using yields and risk as the criteria for your choice. In respect of yields, PTXSPY, PTXTEN and STPROP are pretty similar, with PTXSPY taking a slight lead. However, PTXTEN is less risky, being capped at 10% in any one company, whereas in the other two, you're the the mercy of the big three.

 

For me, risk management is more important than the tiny extra percentage from PTXSPY, so my personal choice is PTXTEN. But in all fairness, all four of the local ETFs are pretty great and boils down to personal preference - performance vs appetite for risk.

 

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Edited by SaurusDNA
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Posted (edited)

Here's an excellent series of reviews on each of the property ETFs if you want some bedtime reading:

 

Property ETF Series Part 1: CoreShares Proptrax SAPY

Property ETF Series Part 2: CoreShares Proptrax Ten

Property ETF Series Part 3: CoreShares S&P Global Property

Property ETF Series Part 4: Satrix Property

Property ETF Series Part 5: STANLIB SA Property ETF

Property ETF Series Part 6: Sygnia Itrix Global Property ETF

 

Note though that the long-term historic yields are not really applicable at the moment since the current yields have more than doubled in recent times, making property ETFs extremely attractive at the moment.

 

 

Edited by SaurusDNA
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