‘Amazing’ gap in property fund returns sparks correction fears

A 27 percentage point difference in performance returns between listed and unlisted property funds over the year to end-June is exposing differences in market valuations and assessments about the impact of rising interest rates, say investment specialists.have over-corrected in the market downturn or unlisted funds are failing to take account of rapidly changing market conditions and outlook.“It’s pretty amazing to have a loss of 8.9 per cent for listed funds and gains of 17.

Other asset class returns ranged from losses of nearly 16 per cent for fixed income through to negative 11.7 per cent for global equities and a dip of 6 per cent for Australian equities, it shows.Rising rents and avoiding the sell-down affecting listed property funds and other asset classes has driven the growth, according to the Property Funds Association, which represents the nation’s unlisted wholesale and retail property funds.

Dan Cave, senior investment analyst for Zenith Investment Partners, adds: “Rent rises will be a strong driver of confidence for property markets in the quarter ahead, particularly in industrial and retail.” The value of most property sectors, such as residential and commercial, has fallen due to the Reserve Bank of Australia increasing cash rates for five successive months from 0.1 per cent to 2.35 per cent.as the central bank attempts to reduce inflationary pressures, which are generally leading to lower valuations for most property sectors.

Investors receive income and, if assets increase, a capital gain on their original investment from either the rising share price or the sale of the asset .

Source: News Formal (newsformal.com)

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