Ask The Experts: Global Property To Provide Low Volatility Returns
Antoinette Plater, Portfolio Manager of First State Global Property Investments shares some of the growth drivers as well as risk factors investors should take note of when investing in the global property market.
What is the outlook for the global property sector in for the rest of the year?
- Dominated by current macroeconomic uncertainty leading to continued volatility
- Global property sector to be able to outperform as it provides defensive earning streams
What are the main growth drivers for the property sector in the longer-term?
- 2 distinct themes in the longer-term: demographic changes due to an aging population and the growing middle class in emerging markets
- An aging population will cause changes in spending patterns and changing demand for residential developments
- Urbanisation in emerging markets will also be supportive of the global property sector
The property sector has taken a negative association among investors since the US sub-prime crisis started. What are the reasons for investors to give this sector a second look?
- Global property sector has gone through a major restructuring since the global financial crisis
- Companies have paid down a lot of debt and restored balance sheets
- Focus on recurrent earning streams and rental growth
- Resulting in less volatile returns, as observed in 2011
What are the risk-reward characteristics of global property as an asset class compared to traditional equities and bonds?
- The sector has much lower risk than equities though higher than fixed income products
- Expected total return of approximately 10%, with much of it coming from yield
Many countries in Asia such as China and Singapore are implementing residential property cooling measures. What are your views with respect to such regulations?
- It is a major issue to contend with as it is outside the control of both developers and investors
- Avoided the residential property sector in China, Hong Kong, and Singapore
- Risk and uncertainty in this area remain high
- In the longer-run, still positive on some Chinese and Hong Kong residential developers
Low liquidity is one of the main risks associated with property investments. What are your views related to this?
- There is an investment rule that all positions taken must be sufficiently liquid such that they may be exited in a certain number of days
- Liquidity is certainly taken into account and so there tends to have larger investments in more liquid stocks
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