Unlisted property funds up

The unlisted retail property funds sector delivered strong performance of 13.7% return over 12 months to 30 June, according to data from Zenith Investment Partners, MSCI, The Property Funds Association and the Property Council of Australia.

According to the report, Australian equities returned 11.9% for the 12 months to 30, June while the Australian real estate investment trusts (AREITs) produced a 14.9% return.

At the same time, direct property returned 8.3%, cash remained stable at 1.9% and fixed income returned 16.1%.

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According to Mark Lumby, head of commercial property at Australian Unity, the capital rate compression was very unlikely to go much further and rental growth should be the focus of future returns instead.

“Strong demand continues to drive capitalisation rates to historic lows, and we are seeing investors move to unlisted property funds across a range of sectors,” he added.

“Over the last five years unlisted property has delivered outstanding returns for investors, with annualised returns of 21.6% per annum, nearly three times global equities and more than ten times stronger than the cash rate (2.2%).”

However, the overall momentum across property had generally slowed even though the low cash rate environment continued to underpin momentum for capital seeking assets, according to Zenith’s head of property and listed strategies at Zenith, Douglad Higgins.

“Across all sectors results are increasingly mixed,” he said. “While industrial property had the greatest capital growth on the previous year, retail’s negative capital growth increased.”




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While there are plenty of strengths/weaknesses of unlisted property assets, I wonder what the prevailing wisdom is for these assets in a scenario where demographics are shrinking? Do they rely on a constant expansion of population and capital or can they maintain high uncorrelated returns in general by virtue of the quality of the underlying assets themselves?

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