Some financial planning professionals in Perth are recommending real estate trusts as an investment vehicle. Recently, the Head of Listed Real Estate for AMP Capital, Mark Ferguson, wrote an article for the AMP Capital blog, called “Australian real estate investment trusts—the right time to invest?”*
The article referenced the fact that Australian Real Estate Investment Trusts (REITs) on the S&P/ASX 200 A-REIT list have delivered a three year return to investors of 18.4$ in the three years ending 31 July 2015. Past performance is not indicative of future performance. They listed four main reasons for investing in REITs.*
Strong Risk-Adjusted Returns
The REIT sector is now seen as a “defensive” investment that offers a high yield. They became popular as a defensive investment shortly after the Global Financial Crisis (GFC). Mr Ferguson expects the market to “be more discriminating,” making the highest quality property portfolios managed by the most conservative capital policies more popular.*
REITs have outperformed cash, direct property, Australian bonds and Australian shares over the last three years. Mr Ferguson doesn’t believe they can continue to perform quite as well as they have, but that they will still remain a good medium to long term investment.*
Strong Balance Sheets
Most REITs are very well-capitalised. This is due to some post-GFC policies but is also a result of conservative capital management techniques, such as sustainable distribution payout ratios, prudent gearing levels and good sell discipline.*
A-REITs offer investors access to high-quality, diversified investment portfolios while providing liquidity if needed. An A-REIT allows an investor to invest in high-quality properties without a prohibitive entry cost.*
Higher than Average Yields Compared to Other Asset Classes
A-REITs are currently offering higher distribution yields to their investors, due to the aforementioned capitalisation level, the increase in value of commercial property and current low interest rates.
To learn more or for an individual consult, call Approved Financial Planners today: 08 6462 0888.
*AMP Capital: “Australian real estate investment trusts — the right time to invest?” 10 September, 2015.