Australian Property-Real Estate Trusts making a positive move forward in 2013
Australian Property-Real Estate Trusts making a positive move forward in 2013
Low interest rates and investor confidence in the Australian Property Sector has led to a forecast of funds into the unlisted and listed property trusts.
The head of Charter Hall's retail division, Richard Stacker, has launched the group's second industrial fund, the $200 million Direct Industrial Fund No.2, aimed at returning a target yield of about 8 per cent. ''Self-managed super funds and high-net-worth investors are now looking for higher yields and that's what is being offered by the property sector,'' Mr Stacker said at a presentation last week. ''The appetite is back, although focus remains on the higher-quality, well-tenanted A-grade assets.''
The research manager for Charter Hall, Chris Freeman, said with the strong yields and secure lease terms available on prime assets, the industrial sector was an attractive choice for investors seeking income returns while looking to minimise risk from a broadly soft labour market. ''For retail investors, a major catalyst for the increased interest in prime-property syndicates seems to be the move of term deposits under 5 per cent, which occurred mid-2012 for the first time since early 2009,'' Mr Freeman said.
Demand and supply fundamentals for the sector looked to be among the best in the industry, with the real value of development approvals for factories and warehouses in the major states about 22 per cent below the 10-year average. Total leasing activity also reflected a strong uplift in late 2012 to end the year in line with the long-term trend, while the manufacturing sector remains a drag on total industrial demand, due to being under pressure from the high exchange rate, the high dollar is further fuelling growth in internet retailing.
Gross corporate profits for logistics operators have risen by almost 50 per cent over the past five years, which has significantly increased their tenancy requirements. Superannuation funds were a key driver likely to differentiate 2013 from 2012 in terms of pressure on property pricing.
Australian super funds are a clear driver of investment property demand, and have shown net asset growth of approximately 10.4 per cent annually over the past 10 years to now be off a total asset base of $1.46 trillion.
This is an asset base so large it is now identical to total Australian gross domestic product, which has grown at just over 3 per cent during the same period. While over recent years international groups have been the dominant purchasing class, now overseas groups may face much stronger competition from domestic funds in 2013. Many people focus just on low bond rates as the catalyst, but the difference now is the rebound in Australian equities.
