Property trusts continue to outperform equities

The listed property trust (LPT) sector has been tipped byAusbil Dexiato continue to outperform the All Ordinaries index, at least until the end of this calendar year.

Ausbil chief investment officer Winston Sammut says the LPT sector has already outshone the All Ords over the past two years, and hasn’t suffered the same volatility as other asset classes.

“It has been a stellar performance by the listed property market which has produced consistently sound performances while other asset classes have suffered enormous volatility,” he says.

The S&P ASX 200 LPT Accumulation Index rose 3.5 per cent in August, while the S&P ASX Accumulation Index could only achieve an overall return of —1.1 per cent.

“Defensive stocks will remain in favour while ever the anticipated global economic recovery continues to be pushed farther out,” Sammut says.

He says that not even the banks, which are usually a safe haven in such times, are attractive as an investment in LPTs for funds flowing into defensive sectors, because banks are expected to be hit by bad debt writedowns over coming months.

Broken down further, the industrial LPT sub-sector was the best performing in August with 6.5 per cent, followed by commercial with 5.3 per cent, while retail was not as strong with 1.9 per cent.

Macquarie Property Trust, Homemaker Retail Trust and Prime Retail group posted the best returns for August, each posting more than 10 per cent.

But Sammut expects that the honeymoon may be over in the new year when the first signs of a global recovery are predicted.

“Over the longer term, the lure of industrial stocks and the prospect of higher interest rates will detract from the property trust sector,” he says.

“We expect that will occur in the new year with total returns for LPTs falling to around 7 per cent.”