A recent review of the real estate market performed by listed property fund manager Folkestone has shown Australian real estate investment trusts (AREIT) to be the best-performing investment vehicle over the past five years.
“Since the lows of the GFC (global financial crisis), non-residential real estate and listed AREITs have delivered positive risk-adjusted returns. In fact, AREITs have been the standout performer over the past five years – taking the title as the best performer in four of the past five years,” Folkestone head of funds management Adrian Harrington said.
According to Folkestone, industry data revealed AREITs generated a return of 15.3 per cent a year for the five years ending 31 December 2015. This was significantly greater than the returns produced by non-residential property at 10.7 per cent a year over the same period, and more than double the yearly returns delivered by bonds and equities, 6.7 per cent a year and 6.6 per cent a year, over the same period.
AREITs also performed well last year, delivering a total return of 14.4 per cent. This compared favourably to bonds, which produced a return of 2.6 per cent over 2015, equities, which generated a return of 2.8 per cent, and non-residential property, which produced a yearly return of 14 per cent.
Folkestone, however, suggested investors look at the 2016 property market with a little more caution.
“At this point, we acknowledge the strong performance of both listed and unlisted sectors in 2015 won’t be repeated to the same extent this year, but we also believe that a major downturn is unlikely in the year ahead,” Harrington said.
“The one caveat on this is if the volatility and negative investor sentiment that has transcended global financial markets in the first two months of this year persists, leading to a major tightening of liquidity in financial markets, then real estate whether listed or unlisted won’t be immune to the fallout.”