AREITS bouncing back, says State Street
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This article was originally published by InvestorDaily, a Sterling publication.
Australian-listed property companies are returning to 2003-era attractiveness for investors, according to commentary from State Street Global Advisors (SSgA).
Australian real estate investment trusts (AREITs) are beginning to more closely resemble the listed property market of around 2003 rather than the AREITs that immediately preceded the GFC, an SSgA statement said.
"Although listed on the Australian Securities Exchange (ASX) like other Australian companies, the listed property market has some very different characteristics and has undergone some material changes over the last 10 years," said SSgA Asia-Pacific head Lochiel Crafter.
"The most significant turning point was the GFC, where a run-up in debt and an increased focus on properties with less stable income streams resulted in the sector being the one of the hardest hit.
"To a certain degree, 2013's AREITs look more like their 2003 predecessors, with the fallout from the GFC resulting in a renewed focus on more stable business models and income streams."
SSgA SDPR exchange-traded fund head Amanda Skelly said the sector is likely to present "robust income opportunities" for investors.
"While today's AREIT valuations are not as attractive as they were 12 months ago, the sector is showing an average yield of 4 to 6 per cent, and presents attractive risk/return characteristics when considered in a portfolio context," she said.
"With interest rates low and term deposits looking less attractive, investors are looking to diversify their sources of income by focusing on higher-yielding Australian equities, including listed property companies."
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