Where in the market can you get a 20% return?


In a low-growth, low-return investment climate, where do you find a 20% return?

For the 12 months to June 2016, it turns out to have been property.

Not residential property but trusts listed on the ASX, which are known as Australian real estate investment trusts, or A-REITs.

real estate reits a-reits real estate trust investment property commercial property residential property industrial property

This sector covers retail, industrial and commercial property as well as some specialist areas such as tourism, hotels, education and aged care.

A-REITs scored the best return of any sector on the Australian sharemarket with 20.2% return (measured by the S&P/ASX 200 A-REIT index) over the 12 months to June 2016, beating equities and bonds hands down.

The spectacular result wasn't a one-hit wonder, either.

This is the second time in three years that A-REITs have been the best performer among the three asset classes.

Over three years A-REITs returned 13.5%pa; over five years it was 12.36%pa.

While these are the overall figures for the sector, the sub-sectors scored varying returns as did individual property trusts.

For example there were returns of 30% and more from the giant Scentre Group and three REITS involved in healthcare and childcare such as Arena, Generation Healthcare and Folkestone Education.

A-REITs such as Rural Funds Group delivered 55% over the course of the year.

Why have A-REITs performed so well? They have been keenly sought by both local and global investors hunting for yield.

The 5% yield from local REITs is double the yield from US REITs. Also A-REITs have been boosted by takeover activity and rising valuations.

However investors need to be aware that the A-REIT sector is trading at a premium to net tangible asset backing of around 30%.

Price earnings are around 17 times. But investors can expect the sector to provide a good yield of 4.5% to 5% over the coming 12 months.


Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
Post a comment