Let's play a game...which of these LPT's haven't revalued their properties and advised the market of substantial valuation increase yet ?
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Argosy and Stride? How many guesses am I. allowed?
Well done you only needed one Just highlighting in this ultra low interest rate environment that the valuation cap rates have come down and the big increases in NTA we've seen for some companies like GMT and KPG are yet to be seen in some shares.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Well done you only needed one Just highlighting in this ultra low interest rate environment that the valuation cap rates have come down and the big increases in NTA we've seen for some companies like GMT and KPG are yet to be seen in some shares.
Good value? Are the increases in NTA due to increases in net rental income or is it just because people are prepared to accept lower yields.
It will be a bit of both. Market yields are always linked to interest rates. Where interest rates go from here is anyone's guess. That's the risk with real estate investing or even just buying a home. The best time to buy is when interest rates are high. (e.g. It's better to pay 10% on 100k than 5% on 200k)
A lot of the REIT yields in Australia are now in the 4% zone. Some here are still just over 5% and are PIE's so taxpayers pay no further tax. GMT and ARG are approx. 5.1% fully tax paid which for personal investors on a 33% tax rate equates to a gross yield of 7.6% which when viewed in the context of the fact that ARG haven't revalued yet, (GMT has with a 10 cent uplift in NTA) is a pretty solid return in an ultra low interest rate environment which looks like staying that way for the foreseeable future.
Further, REIT's aren't subject to the Reserve Bank's open bank resolution whereas term deposits and all money invested with banks are.
I believe a meaningful portion of the massive amount of term deposit money rolling over this year will find a home with safe REIT's when retired folk are offered a pathetic two point something percent term deposit rate to reinvest. Conservative retired investors will be compelled to take on board some risk if they want to continue to live well and not eat into their capital.
I think we see interest rates low for a very, very long time as its really the only way for central banks to get us out of the seemingly incredibly long lasting effects of the GFC so I see further cap rate decreases next year further boosting the NTA of this sector.
Last edited by Beagle; 21-03-2016 at 06:43 PM.
Reason: Add interesting link regarding Stride's new mall
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Ive just sighted Craigs lengthy article headlined
When The Yield Compression Stops....
Companies featured
KPT
ARG
GMT
PCT
PFI
STR
VHP
No buy reccos ,all holds., Sector now trades at an average of 4.7% versus 7% 5 years ago.Outperforming NZX50 primarily because yield compression has driven over half of sector returns over the last 5 years.At current vales investors unlikely to achieve returns above 5.7-7.7% p.a. from the sector and even that would require future dist growth above what has been achieved historically"
At current vales we do not see compelling value in the sector"
A hell of a lot more data and article there (30 pages) and covers 10 Aussie Reits (but not my TIX) and suggests better value there.but thats it for now. Thoughts, rebuttals?. Looks like its too late to buy NZ prop stocks for some time...
Last edited by Joshuatree; 03-05-2016 at 10:37 PM.
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Originally Posted by Roger
Just highlighting in this ultra low interest rate environment that the valuation cap rates have come down and the big increases in NTA we've seen for some companies like GMT and KPG are yet to be seen in some shares.
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