Australia’s unlisted property funds delivered an annual return of 23.1 per cent through to the end of March, newly released data has revealed.
This put unlisted property ahead of domestic equities (15.7 per cent), listed A-REITs (15.4 per cent) and global equities (10.6 per cent) in terms of returns over the same period.
In the first quarter of the year, unlisted property had the highest returns across property asset classes and was surpassed only by domestic equities, Zenith Investment Partners, Australian Unity, MSCI, the Property Funds Association and the Property Council of Australia reported.
The firms indicated that rising rents and capital values had been underpinned by record transactional activity during the quarter. Meanwhile, A-REITS moved slightly lower and were seen to be trading below book value.
“The past quarter saw a spike in the number of property deals, particularly across pubs, hotels, childcare centres and service stations outside of the traditional sectors such as office, retail and industrial,” said Zenith Investment Partners senior investment analyst, Dan Cave.
“Transactions have been a key contributor to record low capitalisation rates and high-asset values, particularly in the industrial and logistics sectors.”
Looking at direct property, a total return of 11.4 per cent was reported for the 12 months to March. The firms said that income returns for the year remained attractive at 4.7 per cent.
Capital returns across direct property over the 12 months stood at 6.5 per cent with growth among all sectors including 23 per cent for the industrial and logistics sector.
Industrial and logistics also had the lowest capitalisation rates at 4.1 per cent, versus 5.1 per cent for retail and 4.8 per cent for office. Office assets produced a total annual return of 9.2 per cent while retail delivered a return of 6.9 per cent.
“It was pleasing to see commercial property assets demonstrate resilience in the first quarter as markets navigated a period of rising rates, higher inflation and global supply chain disruption. This was especially true of industrial and logistics assets,” said Damian Diamantopoulos, fund manager for Australian Unity’s Property Income Fund and the firm’s head of research property/head of REITs.
“However, after a long period of sustained capital growth propelled predominantly by cap rate compression, these conditions, coupled with recent equity and bond market ructions suggest commercial property returns will increasingly be guided by underlying property fundamentals.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
