The Australian listed property trust sector has had a stellar run over the past year and is getting to be "marginally on the expensive side", but it's not time to cut back allocations, two experts from Sydney are saying.
Ern Koh and Mark Thorpe-Apps, who manage BT's Listed Property Securities Fund were in New Zealand last week to give a run down on what is happening in the sector.
Koh says property has been popular as it is seen as defensive and it has had good, consistent, long-term returns without too much risk.
He says the sector has produced 12.5% returns annually for the past 10 years with significantly less volatility than international shares.
"You can almost bank on 10% returns (each year)," he says.
The sector is starting to battle into a bit of a head wind at the moment with rising interest rates and the risk that investors may quickly switch from property to shares as the world economy recovers.
"The sector's not dirt cheap at the moment," he says. "I wouldn't be suggesting you pile into property at the moment."
However, he suggests that allocations should be somewhere in the 7-10% range and they should stay around that level, partly due to the defensive nature of the asset class.
Thorpe-Apps says the BT fund isn't currently invested in listed New Zealand property companies because there isn't a great choice of investments.
He is keen on industrial and retail, but following Westfield's takeover of St Lukes retail isn't an option. Likewise there isn't much available in the other favoured sector - industrial.
BT's only exposure in New Zealand is through some of the Australian companies which own local property, such as Westfield and Macquarie.
Thorpe-Apps says the Australian property market is looking better than New Zealand.
He says one of the differences between the two markets is that nearly all the property in Australia is available through listed vehicles. In New Zealand property is still held directly and the syndicates have proved quite successful at raising money.
Thorpe-Apps says listed property has been the preferred option in Australia since the early 1990s when the sector suffered a major fallout due to lack of liquidity.
He acknowledges some syndicates work, however he prefers listed property because of the liquidity and the fact the market prices it each day.
"I prefer to know what my worth is each day," he says.
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