Global real estate stocks produced attractive total returns with an increase of 23.8 per cent for the 12 months ending 30 November 2012, according to Principal Global Investors' (Principal) Global Real Estate Securities report.
Fundamental improvement across global real estate markets, low overall interest rates and accommodative monetary policy in key countries served as catalysts for the sector.
The report shows that Asian property stocks have led the way in 2012, with Europe also achieving the index average, but North America lagging.
"Significant monetary and fiscal stimulus initiatives across the Asian region have served to reflate property stock valuations, after a difficult 2011," Principal said in the report.
"Meanwhile, increased expectations of a coordinated response to Europe's sovereign debt woes have served as a catalyst for property stocks across that region."
Australia's early 2012 decision to adopt monetary policy provided an attractive catalyst for real estate stocks.
"Australian real estate investment trusts (A-REITs) have recapitalised their balance sheets and offer attractive valuations and dividend yields," the company said.
"Australia and New Zealand had been expected to feel some of the same headwinds as other newly-developed Asian countries, with their commodity-based economies being heavily impacted by reduced export volumes to China."
Recent Reserve Bank of Australia (RBA) policy rate cuts from 4.25 per cent to 3.50 per cent in response to anticipated global uncertainties also allowed market indications to emerge, suggesting residential may be stabilising, Principal said.
The report explains that although investors have recently flocked to lower risk real estate stocks, investors would be better placed to take advantage of stocks able to deliver superior cash flow growth.
"Our approach at this time has been to balance the portfolio between low and high risk stocks rather than aggressively position toward one style or the other. We believe this balanced approach, particularly in today's uncertain environment, will support superior long-term value creation for our clients," Principal said.
