Global REITs expecting another year of positive returns
Different property types and locations are at varying points in the real estate cycle, but the general direction is positive, according to ING Investment Management (INGIM).
Global real estate investment trusts (REITs) were expected to deliver returns of between 8 per cent and 12 per cent thanks to an improving global economy and growing dividends, according to INGIM’s 2011 global property securities outlook. It stated that growth in cash flow per share would be the primary driver of real estate company returns in 2011, since capitalisation rate compression had run its course.
INGIM stated that rising interest rates were not a concern, since listed real estate often delivered positive returns in periods of economic improvement — even if interest rates were rising.
Looking at the various regions, INGIM stated that Hong Kong property companies expected impressive outperformance over the next 12 months, growing earnings by 15-20 per cent and producing dividend yields of 2-3 per cent. Japan was expected to deliver a total return of 5-10 per cent and Singapore 10-15 per cent.
Western and Northern Europe were expected to provide more attractive investment opportunities compared to Southern and Eastern Europe, with a 5-10 per cent total return expected across Continental Europe over the next 12 months and a 5-6 per cent dividend yield. The UK was expected to deliver a total return of 8-12 per cent over the next year, while total returns of 8-12 per cent were anticipated in the US and Canada.
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