Everyone loves to nab a bargain. In a depressed market, savvy investors are taking advantage of bargain prices on quality investment assets.
As one example look at listed property trusts (also called Australian Real Estate Investment Trusts or A-REITs). Pre-GFC they delivered spectacular returns, especially in 2004 and 2006 with average returns of 32.2% and 34.1% respectively. For some funds, these returns came from increased gearing, moving into property development and investing overseas—all higher risk activities. Following the credit crunch, some funds (like Centro and GPT) got into trouble and their share prices crashed, resulting in an average market ‘return’ of -55.3% in 2008.
Uncertainty amongst investors saw that whole market segment sold down, even for individual funds that were secure and well managed.
By identifying A-REITs that have had significant falls in value and looking for the ones that hold highly diversified properties that are well tenanted on long leases, investors can find good quality opportunities. At current prices, yields are projected to be around 6.5% pa with good prospects for significant capital growth.
It’s worth speaking to an ipac financial adviser about the growing number of opportunities in sectors that may offer continued income streams and long-term capital growth – there are some smart bargains around.
