CAN LISTED PROPERTY SHARES BE A SURROGATE FOR DIRECT PROPERTY INVESTMENT BEHAVIOR?

The listed property sector in South Africa has increased to a level which could be considered as a good representation of the income producing property market. This provides the opportunity to consider investment behaviour in the listed market and apply it on direct property investment generally. Various publications show the irrational behaviour of investors, causing differences between direct and indirect property investment behaviour. The purpose of the paper is to critically evaluate the behaviour in the listed property sector in order to explain the difference to direct property investment behaviour, which could assist in market interpretations opposed to the traditional relative techniques of asset valuation. Stock market listed property investment funds offers the opportunity to compare indirect property investment as financial asset, to direct property investment, which could bridge the gap between irrational investment behaviour and intrinsic asset values. The 7 largest property loan stock companies in South Africa are investigated as a case study, which represents 90% of the PLS sector. The daily share price movement is correlated with the value of the shares as per accounting methods of valuation and compared to the actual property values as appeared in the financial statements of these companies. The study uses statistical correlation techniques as well as íRAP analystî artificial intelligence software to obtain predictions. The outcome of the study is an explanation of the irrational behaviour of investors and how this correlates with the intrinsic value of the underlying assets of the investment medium, being a listed property company. This would assist in the explanation of market behaviour and provides the opportunity to more accurately predict return requirements of investors, which might be used in the valuation of individual assets.