By guest contributor Binesh Seetanah, analyst, Atchison Consultants
Australian real estate investment trusts (AREITs) continue to provide relatively attractive yields in the current low interest rate environment. As at 30 September 2017, the forecast earnings yield1 was 5.7%.
At the end of September the difference between AREITs’ average earnings yields and the 10-year Australian government bond yield was 3.0%. This is higher than the long term average spread of 2.7%. The spread’s 20bps fall during September 2017 is attributable to a combination of a 10bps fall in earnings yields and a rise of 10bps in bond yields.
Source: RBA, UBS
Forecast earnings yields by property sector over the next year are as follows.
Forecast Earnings Yields
During the month, forecast earnings fell in the office, retail and diversified sectors as rental forecasts were pared back slightly.