By guest contributor Binesh Seetanah, analyst, Atchison Consultants
During the month of October, earnings forecasts were increased in the office and retail sectors. The higher forecasts were the result of expectations occupancy rates and rents would rise over the forecast periods.
Australian real estate investment trusts (AREITs) continue to provide relatively attractive yields in the current low interest rate environment. As at 31 October 2017, the average forecast earnings yield 1 was 5.9%.
At the end of October, the earnings yields exceeded the 10-year Australian government bond yield by 3.1%. This is higher than the long term average of 2.7%. The premium over the bond yield increased by 0.1% during October 2017 reflecting a combination of a 0.1% increase in bond yields and AREIT earnings expectations increased by 0.2%.
Source: RBA, UBS
Forecast earnings yields by property sector over the next year are as follows.