The listed property trusts in Australia have bounced back from the global financial crisis and have managed to not only match, but also better the equities market. This has been proved by the fact that the last financial year’s returns came in at 8% higher than general stocks in the country, meaning that the REIT sector has managed to prove that it is once again a force to be reckoned with.
This sector of the market actually came in as the third highest performer throughout the year – only losing out to the 200 Information Technology stock index and the All Ordinaries Gold index. These figures were provided by Maxim Asset Management, who are regarded within the Australian financial market as one of the most expert voices in the area.
The actual figures provided showed that the A-REIT 200 reported figures of 22.8% for the financial year – nearly 8% more than the S&P-ASX 200, which could only manage a figure of just 14.3%. These figures have been contributed to by all sectors and areas of Australia, with strong performances particularly evident in Brisbane and the other larger cities. In fact, removalists in Brisbane have reported one of the busiest periods in recent history as the housing market comes out of its slump.
This recovery by the REIT has been even more remarkable when it is considered that the sector was the seven lowest performing during the period from March 2010 to March 2011. Since this period REIT has gained about AUD 4 billion in value, which is a remarkable figure for a sector that was struggling so badly.
The best performer within the REIT was undoubtedly the Goodman Group, which managed to make a return of 102.1%, mainly due to the fact that they managed to renegotiate AUD 4.1 billion of debt . This enabled them to have the best performance of anyone within the real estate industry and provided a welcome boost to the fortunes of a company which was – until recently – struggling.
On the other end of the scale, the worst performer was Ardent Leisure Group. They saw their return come in at around -22.1%, which sums up the year that they have had. They will undoubtedly bounce back though and will hope to emulate the Goodman Group in this respect.
The research head for the UBS Australasian researchers stated that the reason for the growth of the REIT was due to the increase in sentiment towards the industry, as finances were rebalanced and assets were written down. This is allied with the fact that the REIT has been incredibly defensive in its dealings as the market has been down – which was exactly the right tactic in the situation.
One of the most effective tactics that REITS used to protect against the financial problems was to decrease the amount of money that they made from potentially volatile markets. This was most apparent in the amount of percentage earnings rent made up in the overall figures. Before the economy took a nose dive, REITS was collecting about 14% of its revenue through rent, but that figure now stands at about 8%.
This decrease in rents has caused the trusts to be far less volatile and has ensured that there has been no loss in income due to risky ventures. On top of this, REIT also managed to renegotiate billions of dollars of loans, as well as tap the market for AUD 12 billion. This doesn’t just mean that the current market is healthy, but also that it will remain relatively healthy should the market fall again.
One thing for sure though is that the housing market throughout Australia is bouncing back from the economic distress that it was in previously – good news for removalists in Brisbane, Sydney and other cities around the country.
Article written and supplied by Anna K. on behalf of Your Local Movers
Anna K. is a journalist from Brisbane,Australia. She writes for several blogs about finance topics such as real estate, insurance and several others which attract attention of many readers.
- Friday 27 May 2011