AREIT sector set to offer solid returns in 2020

AREITs REITs real estate property market SG Hiscock Grant Berry

15 January 2020
| By Oksana Patron |
image
image
expand image

The Australian real estate investment trust (AREIT) sector, which delivered a strong performance in 2019, is expected to continue to offer investors solid returns in the coming 12 months should bond yields remain low, according to SG Hiscock & Company’s director and portfolio manager, Grant Berry.

However, Berry warned, investors should not expect the 2020 returns to match those from last year and should be quick in recognising emerging risks such as the market’s late stage in the investment cycle.

“For the past two years, we have been at an advanced stage in the property cycle, particularly for commercial office and industrial property sectors,” he said.

Further to that, 2019 which saw geopolitical issues weigh heavily on global markets created an interesting year for Australian property market and its subsectors. Given the interest rate cut by the Reserve Bank of Australia (RBA) 2019 turned out to be ‘accommodative’ and provided a favourable backdrop for property, Berry said.

However, looking forward the firm would take a fairly conservative approach to valuations pushing up capitalisation rates.

“Our preference will be b to have exposure to high quality assets, AREITs with less cyclical factors, and investments trading at discounts that are out of favour.

“The recent shift towards value, with some reduction in risk behaviour, has seen this approach start to outperform while continuing to deliver good absolute returns.

“2019 has been a relatively good year for the AREIT sector, with strong returns including distributions and, looking ahead, if bond yields stay around current levels, we would expect the sector to be well supported.”

AREIT indices performance since inception

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

1 month 3 weeks ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

2 months ago

Interesting. Would be good to know the details of the StrategyOne deal....

2 months ago

SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positiv...

2 weeks 2 days ago

Original bidder Bain Capital, which saw its first offer rejected in December, has returned with a revised bid for Insignia Financial....

1 week 2 days ago

The FAAA has secured CSLR-related documents under the FOI process, after an extended four-month wait, which show little analysis was done on how the scheme’s cost would a...

1 week ago

TOP PERFORMING FUNDS