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Samantha Hodge is a journalist with InvestorDaily, a Morningstar publication.

Australia is likely to have a defensive real estate investment trust (REIT) market in 2012 as pressure on the retail and residential sectors eases, making the local market attractive for investors, a UBS executive has said.

"[In Australia] you have some growth because the economic fundamentals are relatively decent. Compared to Europe it feels pretty strong," UBS head of real estate and contractors research John Freedman said.

"At this point, when we are looking into 2012, notwithstanding that we see Australia as a very defensive REIT market globally ... it seems to us that 2012 looks to be a year where the cyclical pressures are declining for retail and residential."

Freedman said the retail sector was hit hard by cyclical and structural issues in early 2010.

"Investors would say to you, 'yes John, I know Westfield (WDC) is cheap, but no thank you, I don't want to be there', and what we are seeing with the RBA (Reserve Bank of Australia) reversing direction in the last two to three months is that investors are saying 'okay, obviously the outlook for office employment is not exceptionally hot at the moment, quite the opposite, so we'll probably trend away from stocks with those types of exposures and we want to move to stocks that might benefit from rates being cut'," he said.

"Obviously retail and residential fit very squarely within those. Industrial I would argue is partly a derivative of retail because not a lot of tenancy demand comes from retail, but it kind of sits in the middle.

"We don't see next year as being a big year for merger and acquisition [activity]. We still believe that M&A will be relatively limited, because we don't think that the conditions are there to warrant it, and those conditions are 'a willing buyer and a willing seller' and also willing credit markets."