REIT sector suffers negative 31 per cent return
Credit Suisse Asset Management (CSAM) has painted a bleak picture with respect to recent returns in the Australian real estate investment trust (REIT) sector but argues that value exists where stocks are lowly geared and have proven management teams.
In an analysis of the sector released this month, Credit Suisse AM director of Global Real Estate Securities Patrick Barrett pointed out that the current problems besetting the sector did not represent a 1990s-type property crash and that the bigger trusts such as Westfield, Stockland and Mirvac all had relatively low gearing and were well positioned to see out the cycle.
As well he said that the 31 per cent fall in returns over the 12 months to June 30, suggested that a lot of the bad news had already been priced into the sector.
However, Barrett said that the sector was nonetheless facing some headwinds due to the cost of money, tempering business and consumer demand and the slowdown in housing.
He said that as a result, the market was expected to provide a weak earnings growth outlook, with some trusts having already cut earnings forecasts to more sustainable levels.
Looking over the horizon, Barrett said CSAM is arguing that the sector needs to get slightly cheaper before investors return to Australian REITs.
AUTHOR
Mike Taylor
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