Positiv gegenüber globalen Immobilien-Aktien

Property equities have returned 11.0%1 per annum over the past 10 years to the end of June 2013 – ahead of both equities and government bonds and in line with our long-term expected returns from the sector of 10-12% p.a. This includes a period of significant volatility following the onset of the global financial crisis in 2007. Being traditionally viewed as a more defensive asset class than general equities, real estate equities have a lower volatility with a greater proportion of their total return being driven by income. The length of rental agreements ensures a steady, bond-like income stream that can provide a degree of insulation against inflation.

Listed property stocks have fallen more than wider markets in the recent sell-off as a result of concerns that the sector is more sensitive to interest rate moves and that an increasing bond yield will make alternative income streams, such as that from real estate less attractive. Our view has been that the spread (or risk premium) between the yield provided by physical property assets and government bond yields of c.400bps provides us with a healthy buffer before increasing bond yields will impact property values. The historical spread is 200-250bps, so this suggests investors in real estate are already discounting higher bond yields in the future. We also take comfort from the fact that the reason the US Federal Reserve is considering tapering quantitative easing is due to signs of better-than-expected economic growth. Ultimately this should translate into greater occupational demand for real estate assets and, as a result, rental growth. There are already signs of this, most notably in the US, which should result in a positive impact on capital values in the future.

We therefore still expect average property values to recover in line with tenant demand, given the general lack of new development and, as a result, the medium-term outlook for property is healthy, even in a modestly rising rate environment. However, in a weak economy there will be a big difference between the best and the rest. Equity market volatility is likely to persist over the coming months but with an attractive dividend yield and access to capital markets the companies in which we invest remain well placed.

We are currently positive on the US as we believe that taking into account the whole universe of 140 stocks, we expect the dividend yield of North American REITs at 4.0% to grow at around 10% in each of the next two years as both free cash flow and pay-out ratios rise. The quality of the portfolios of many of the larger REITs is still good, notably in the regional mall sector, where we are seeing increasingly positive trends in same-store sales growth. The apartment sector also continues to experience rental growth, despite the beginnings of a revival in house prices. Other sectors, such as healthcare, self-storage and lodging are also seeing improving fundamentals.

We also remain fundamentally positive on the Japan story despite the volatility in stock prices. There are already some signs of improvement in the Tokyo office market, where the majority of our exposure sits, and, while share prices will be dictated by macroeconomic factors in the short term, we expect these improving fundamentals to be reflected in share prices over the medium term.  Elsewhere in Asia, Hong Kong and Chinese developers look cheap, but often do, and any rerating will require a shift in investor sentiment. Singapore REITs also seem fairly valued, offering attractive dividend yields. Australia’s real estate sector also offers good yield, but with macroeconomic uncertainty and currency weakness we remain underweight.

In Europe we are overweight in the UK (especially London), France and Scandinavia. London is the only market with any significant growth in rental values – in both office and retail – and the appetite of investors for good properties is undiminished. Our French overweight is stock-specific and based on valuation. The Scandinavian economies are generally in better shape than their European counterparts and we have exposure to Stockholm and the Öresund region.

Although the global economy faces significant challenges – maintaining growth against a backdrop of political, monetary and fiscal uncertainties – it may be fair to say the risks are reflected in the price. While equity markets may remain volatile in the coming months, and investors may use this as a reason to take some profits, the underlying real estate markets are on an improving path in most markets globally and ultimately this is what will drive property share prices. The yield provided by both physical property and property stocks will also remain attractive relative to alternatives, even with bond yields rising.  Listed property companies remain well placed in terms of asset and balance sheet quality and are continuing to exploit their cost of capital advantage, making earnings-enhancing acquisitions. They have also used the low yield environment to both extend the duration of their debt and diversify their funding sources meaning they are less exposed to rising rates.

1Source: Thomson Reuters Datastream; FTSE EPRA/NAREIT Global Total Return Index as at 30 June 2013 (in US dollars).