Listed property vehicles outperformed the 50 biggest NZX stocks last month, returning 3.9 per cent in December, ahead of the NZX50's 2.7 per cent.

Jeremy Simpson, Matthew Leach and Angus Simpson of Forsyth Barr have just released their evaluation of the property sector and pointed to investor sentiment remaining strong this year.

The best performing listed property vehicles last month were Precinct Properties up 7.2 per cent, DNZ Property up 4.9 per cent and Vital Healthcare up 4.1 per cent.

"The sector was also boosted by the dividend payments by Argosy, Goodman Property, Precinct and Vital Healthcare," they said.

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Worst performers last month were Argosy, up only 0.4 per cent and Augusta up only 1 per cent, although they said Augusta was the top performer last year with a 37.1 per cent return and the top performer during the last four years.

In the 12 months to December the property sector was up 25.4 per cent, compared to the NZX50 up 19.2 per cent and the first year of out-performance over the broader equity
market since 2011.

Other top performers throughout last year were DNZ up 33.9 per cent and Vital up 31.2
per cent.

"Investor sentiment has remained strong towards listed property given low interest rates and hence the appeal of yield stocks, solid full year 2014 results and net tangible asset gains from most listed property vehicles, an ongoing strengthening of the underlying property market and a pick-up in investment and development activity. These themes are likely to continue to drive investor interest in the near-term, combined with further net tangible asset expansion could mean the delivery of a dividend yield type return in 2015.

"Risks to the sector holding up are that it is very fully priced based on price to NTA and P/E multiples providing little margin for safety, equity issuance is increasingly likely at these levels which can dampen share prices and there remains a lack of meaningful underlying earnings growth for many.

"A strengthening property market plus an attractive dividend remain the attractions for a fully priced sector. The defensive quality of the cash flows relative to the broader equity market has appeal while the underlying property market fundamentals continue to strengthen and investment and development activity remains robust. We expect asset values and hopefully market rents to continue to strengthen, while risk factors are the record premium rating relative to NTA and the low level of earnings growth," they said.