By guest contributor Atchison Consultants
Australian real estate investment trusts (AREITs) prices suffered in February. AREIT prices fell noticeably along with the broader market rout on 6th February. The S&P/ASX 200 AREIT index fell 2.6%, offering some modest protection to investors while the S&P ASX 200 index fell 3.2%, following Wall Street down for its worst one-day point fall since September 2015. To some extent, AREITs have a stronger capacity to resist a market rout.
At the end of February, the earnings yields exceeded the 10-year Australian government bond yield by 3.74%, which is higher than the long term average of 2.76%. The premium over the bond yield was unchanged compared to the end of January. All AREITs sectors increased their average forecast earning yields1.
Source: RBA, UBS (2018)
Forecast earnings yields by property sector over the next year are as follows.
Forecast Earnings Yields
Source: UBS (2018)
1 Earnings per unit divided by unit price. Weighted by market cap.