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REAL ESTATE INVESTMENT TRUSTS & FUNDS RESEARCH

Investors continue to enjoy healthy returns

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AUSTRALIAN unlisted property funds continue to deliver healthy returns to investors, and listed trusts, direct property and equities through the 2018 financial year.

According to a quarterly report produced by Zenith Investment Partners, MSCI, the Property Funds Association and the Property Council of Australia, unlisted funds returned 18.7% over the 12-month period.

Australian equities returned 12.9% and A-REITs 9.7%, with both sectors showing an uplift over the last quarter, while Australian direct property returns came in at 11.7%. Income returns were stable at 5.7%.

“Despite a backdrop of global uncertainties, attractive dividend yields, earnings growth and valuation multiple expansion was supportive,” the report said.

“The low cash rate environment is expected to underpin momentum to capital seeking assets with attractive yield spreads. As it relates to property, the momentum of this driver may ultimately cool without supportive growth in rents.

“The structural nature of real estate as a strong generator of low volatility income continues to attract capital flows in an environment where low bond yields have kept spreads attractive.”

Strong rental growth in key office market propelled the sector to capital growth of 8.7% and total returns of 14.7%. Industrial also enjoyed growth over the period as demand for e-commerce and logistics services grew, while retail softened amid sector headwinds.

Global equities returned 11.9% over FY18, followed by 4.0% for fixed income and 1.95% for cash.

Unlisted property’s five-year annualised return was 22.2%, which came in ahead of global equities (12.0%), listed property (11.9%), Australia equities (9.8%), fixed income (5.9%) and cash (2.4%).

Australian Property Journal