Economic slowdown plays to REIT’s strengths
The predicted worldwide economic slowdown may have a positive effect on global property investing and will be welcomed by ING Clarion managing director and chief investment officer, Ritson Ferguson.
According to the Philadelphia-based property securities expert, the current growth-rate is unsustainable and has the potential to negatively impact real estate investment trusts (REITs).
“A little bit of slowdown is welcome because we’ve been a little overheated in many parts of the world and while that means good things for the demand side of real estate, it creates pressures on interest rates that can have an offsetting effect, as you need to re-price real estate assets to meet the higher yield expectations,” Ferguson explained.
“If by slowdown we go from an unsustainable pace of expansion to a more normal level, I actually think that could be wonderful for real estate because the ideal environment for investing in real estate is steady and sustainable economic growth, stable interest rates and controlled new construction — and that’s the environment I think we are headed towards.”
Commenting on the rapid growth of REITs on a global scale, Ferguson singled out Asia as an example of their significant proliferation.
“While we have had these structures in Australia for quite a while, in places like Japan they were only introduced in 2001, in Hong Kong only two years ago and in Singapore only four years ago,” Ferguson said.
“Yet, if you look at Japan today, we have 39 REITs, which is almost $40 billion in market capitalisation in a space that didn’t even exist five years ago.”
He also believes the developing market of India will take a share of this growth in the near future.
“Right now there are no public companies in India, only commercial assets, but India is a very interesting market for us and we see the prospect for initial public offerings of India real estate companies in the next six months,” Ferguson said.
“My team is already doing the on-the-ground research and meeting with companies, and I expect that in the next six months we will be owners of India commercial real estate companies in our fund.”
The ING Wholesale Global Property Securities Fund was launched in Australia last year and recently received a ‘highly recommended’ rating from Lonsec and five stars from Standard & Poor’s.
Recommended for you
The possibility of a private credit ETF is looking unlikely for now with US vehicles seeing limited uptake, according to commentators, but fixed income alternatives exist that can provide investors with a similar return.
Ahead of the approaching end of the financial year, State Street has shared five tips for advisers who are using ETFs in their client portfolios.
The use of active ETFs in model portfolios by financial advisers is a key factor in the growth of the products for iShares, according to BlackRock.
Global asset manager BlackRock has identified bringing private markets to the wealth channel as a key business area for the firm that could generate US$500 million in revenue in the future.
