AREITs returned a total of 24.6 per cent in the 2016 financial year, compared to 20.2 and 11 per cent in 2015 and 2014 respectively, according to BDO’s annual performance survey.
“The low Australian interest rate environment continued to provide a significant boost to the sector as the high yields and solid returns proved attractive to investors,” BDO national leader of real estate and construction Sebastian Stevens said.
“However, recent increases in global bond yields has seen a significant sell-down on both AREIT shares and listed real estate trusts in the US, UK, Singapore and Hong Kong.”
Amid equity volatility, AREITs proved attractive to investors as a longer term asset, according to Mr Stevens.
“AREITs outperformed equities in the last three years and have been strong in comparison to other sectors such as banking, metals and mining,” he said.
“Historically, AREITs have been viewed as stable distributions that have had low share price volatility to match predictable returns. The current short-term market volatility doesn’t stop them from being an attractive buy and continued low interest rates mean there’s likely to be ongoing success for the sector.”
Fuelled by low interest rates and the current investment environment, this year’s performance is perhaps unsurprising.
“The AREITs look to be ‘making hay while the sun shines’ by de-risking for the future, with a number of AREITs realigning their debt structures with low interest rates and longer term debt facilities,” Mr Stevens said.
“Overall, in a unique period for the Australian economy, it is high-yield, defensive sectors that are delivering returns from capital growth with assets that have traditionally provided most of their returns through income.
“Despite the risk that increases in bond yields will continue to put pressure on the value of listed property stocks, AREITs should still prove popular with investors because of strong underlying fundamentals.”