Irrational dumping of good quality listed property trusts (LPTs) offers a buying opportunity for financial planners constructing property portfolios on behalf of clients, according to Mirvac Group.
LPTs have been hammered since the credit crunch set in and are down 40 per cent since October 2007. David Rees, head of research, says in recent months the market has failed to distinguish between prime and secondary grade real estate assets and has been pricing them similarly. “The market is becoming far more discriminatory in terms of prime and secondary assets, type of asset and location,” he told planners at Paragem’s professional development and leadership day in Sydney. “Sooner or later it will discriminate in the LPT sector between quality and risky trusts, just as it will in the direct property sector.”
While international diversification is still valid, Rees believes Australian listed property offers better value in the current market environment. Andrew McGrath, portfolio manager and investment analyst at UBS, says investors can expect 8 to 12 per cent returns from LPTs over the long term despite strong potential for further underperformance in the short term.