Aussie REIT sector still robust, says SSgA
Australia's listed property market has changed significantly since the global financial crisis (GFC) and should continue to generate "robust income opportunities for investors," according to State Street Global Advisers (SSgA).
Head of SSgA for Asia Pacific, Lochiel Crafter, said although the listed property market was listed on the Australian Securities Exchange, it had developed different characteristics and undergone some material changes over the last 10 years.
"The most significant turning point was the GFC, where a run-up in debt and an increased focus on properties with less stable income streams resulted in the sector being the one of the hardest hit," Crafter said.
"To a certain degree, 2013's Australian real estate investment trusts (A-REITs) look more like their 2003 predecessors, with the fall-out from the GFC resulting in a renewed focus on more stable business models and income streams," he said.
A-REITs have reduced debt, sold off non-core assets and simplified their business structures in the past four and a half years to the point where debt levels are now close to 2003 levels at 26 per cent, compared to around 35 per cent in 2007.
Furthermore, SSgA's head of SPDR exchange-traded funds, Amanda Skelly, believes that — contrary to some arguments that the listed property sector is one to avoid — the sector should provide good income opportunities.
"While today's A-REIT valuations are not as attractive as they were 12 months ago, the sector is showing an average yield of 4-6 per cent and presents attractive risk/return characteristics when considered in a portfolio context," she said.
"With interest rates low and term deposits looking less attractive, investors are looking to diversify their sources of income by focusing on higher yielding Australian equities, including listed property companies."
Recommended for you
AUSIEX has announced it will acquire FIIG, a specialist fixed income provider with $4.5 billion in funds under advice.
Platinum Asset Management has announced it is in discussions with a global alternatives fund manager regarding a possible merger to create an $18 billion firm.
Frontier Advisors has bolstered its Japanese footprint through a partnership with the $350 billion asset management arm of Nippon Life Insurance Company.
JP Morgan Asset Management has appointed an ETF specialist from Vanguard as it seeks to expand its ETF range.
