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Commercial Property, Direct Property, Listed Property, Residential Property

Real estate sector set to recover

Real estate recovery

The real estate industry is beginning to show signs of improvement after severely underperforming for most of 2020.

The outlook for the real estate market is looking strong despite being one of the sectors most negatively impacted by the COVID-19 pandemic, an investment expert has said.

Quay Global Investors portfolio manager Chris Bedingfield noted the recent announcement of a COVID-19 vaccine was a key factor behind the real estate industry beginning to show signs of recovery after severely underperforming for most of 2020.

“Real estate companies were impacted not just by the lockdowns, but also by being asked by governments to shoulder some of the burden of the economic impact, for instance, by cutting rents to affected businesses,” Bedingfield said last week during a Bennelong Funds Management briefing.

“A successful vaccine should help to reverse some of these headwinds and we are already starting to see this priced into some sectors.

“In addition, there have been some winners during 2020 from the lockdown, such as data centres, self-storage and industrial property and single-family homes, although some of these sectors aren’t as common in Australia.

“Our view is that the real estate sector is underpriced and that there will be good opportunities in 2021.”

In addition, he highlighted the important role of government and central bank stimulus programs in helping to reverse the negative effects of the pandemic on the real estate market.

“This is providing a permanent repairing of household balance sheets which will reverberate long beyond 2020. Effectively the stimulus packages are setting up consumers for the next few years,” he added.

“We are already seeing the effect of this in house prices, which have been holding up extremely well, not just in Australia but also in the US and UK.  We will also see this flow through to the retail sector.”

In October, Smarter SMSF chief executive Aaron Dunn said SMSFs reporting real property assets needed to ensure they provided sufficient evidence in line with the latest ATO guidance to support valuations.

In May, I Love SMSF chief executive Grant Abbott said SMSFs were well placed to become involved in property development after the lifting of the COVID-19 lockdown and should keep an eye out for stalled or lapsed developments requiring investors.

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