Global LPTs tipped to become norm

Most new property trusts in the next 12 months would feature overseas property as the famine of good quality Australian properties coming to market continued, a prominent property manager has predicted.

Centro Properties Group senior funds manager Bryce Mitchelson said with property yields for retail in Australia about at 6 per cent and commercial borrowing at about the same rate, the economics of putting domestic property in trusts wasn’t stacking up.

“We can get higher returns in the US where yields are between 6 to 7 per cent and interest rates are about 4 per cent,” he said.

Managed Investment Assessments director Anton Lawrence said he expects to see several new trusts this financial year with overseas assets.

“We are seeing a number of managers have a dabble with overseas property and some will be more hybrid-type products that will be a mixture of property securities and some direct property,” he said.

Mitchelson said stamp duty and the NSW vendor tax was also limiting local property purchases by managers. This was a major factor in Centro’s recent move to transfer a number of Australian shopping centres into its new listed property trust, rather than consider selling them.

Lawrence agreed the NSW vendor tax is severely limiting property transactions in the state and hence managers are looking further a field.

“When the legislation allows retail property trusts to be established in the UK I suspect we will see some new trusts with property from there and similarly Europe,” he said.