Wobbles in equity markets make real estate more attractive

Thursday 13 August 2015

The bad news for equities is good news for property - at least in the short term. The surprise downgrades to supposed blue chips and the wobbles of the small investor favourites like the banks, reinforce the seeming security of today's property, despite the low return. In the long term, property is not immune to the weaknesses in the broaders economy. Corporate troubles show up in weaker underlying demand for commercial and residential property and the selloff in the banks foreshadows tighter lending to real estate. Small investor in particular need to be wary of investments that look good now but will not look so good when tenants move out or debt costs rise.

But at the moment the real estate investment trusts (REITs), and in fact most forms of commercial property investment are having their day in the sun. Some have commented that the REITs would show "a really consisent performance" which highlights their investment attraction, particularly to those heading to retirement. "The distributions, critical to small investors, have already been fully disclosed. All the REITs in the ASX bar one - a small REITs caught with an industrial vacancy in Queensland - are delivering on target to the investors. The response if reflected in the pricing. Over the past three months, as the broader ASX 200 lost 5.9%, the REITs lost only 0.3%. Over the month the REITs are in positive territory unlike the broader equities.

 

Source: NAB - A-REIT News - Thursday 13th August 2015

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