Buoyant Australian market boosts Investec Fund

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Buoyant Australian market boosts Investec Fund

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Published Date: 2018-05-16 | Source: Stephen Gunnion | Author: Stephen Gunnion

Buoyant Australian market boosts Investec Fund

Positive conditions in Australia and New Zealand and strong foreign capital flows are creating opportunities for the Investec Australia Property Fund

Foreign capital is flowing into the Australian property market, particularly from China. Investec Australia Property Fund says it's maintaining a disciplined approach to growth though, looking for opportunities to expand its portfolio but investing in the right asset last the right price.

Recovering commodity markets and spending on infrastructure are also having a positive impact, with foreign capital responsible for half the volumes of office transactions recorded last year. Most of that has been focused on Sydney and Melbourne, but some of it is finding its way to other cities including Brisbane and Perth, which are seen as a counter-cyclical play.

Demand from locals remains strong too, underpinned by an economy that grew by 2.25% last year and steady interest rates. The economy created 403 100 new jobs in 2017 with the unemployment rate fighting to 5.5%. Investec Property Limited (IPL), which runs the fund, says the improvement in employment has resulted in rising demand for leases and declining vacancy rates. New Zealand's economy is doing well and is forecast to grow by 3% this year. The fund says fresh offshore capital is entering Wellington, where the 2016 earthquake has resulted in a reduction in vacancies and increased pressure on rentals. IPL bought the iconic The Majestic Centre there last year to diversify its portfolio.

Acquisitions like The Majestic Centre contributed to the fund's net asset value 11.1% rise in the year to end-March, supported by a valuation uplift of $73.2 million. The fund has declared a final distribution of 5.08 Australian cents before withholding tax, 3% higher than last year. That brings its total distribution to 10.03c, also 3% higher and in line with guidance.

IPL says a shift in global bond prices has had a knock-on effect on real estate investment trusts in Australia, which could delay its plans to take a dual listing on the Australian Securities Exchange. However, it says work continues to prepare the fund for a listing in Australia when market conditions permit.

Its shares rose 1.1% to R11.14 yesterday.



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