Listed property continues to outperform
Listed property trusts have been the hottest sector on the Australian Stock Exchange over the past 12 months, delivering a 9.71 per cent return, although the performance may not last. Low interest rates have helped the LPT sector to outperform other asset classes significantly. InTech Financial Services says its recent strong performance has also lifted long-term returns: 11.77 per cent in the ten years to August 31, compared with Australian shares' 11.37 per cent return.
Danny Housepeters, an analyst with Property Investment Research, attributes the LPT sector's success to a number of factors, including investors' search for a “safe haven”. Low interest rates have also played as part a they lower the cost of borrowing, he said. However, investors should consider LPTs' future potential before committing money to the sector, with many analysts and fund managers expecting returns to flatten out over the next year rather than leaping ahead of the market. Mr Housepeters thinks that LPTs' outperformance over the past 10 years was an “anomaly”, unlikely to be repeated.
Property Investment Research says that over the next year the S&P/ASX 300 property trust index should stabilise, with retail, industrial and office trusts most likely to perform better than general LPTs. One of the biggest risks to the LPT sector is that global sharemarkets may rebound, as this would see investors switch from “safe” into growth sectors. Simon Guiliano from InvestorWeb says that LPTs are suitable for long-term investors who treat the investments like bank accounts, receiving dividends each year and a chance of some increases in share prices.