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Due to low liqudity across the reit, once there is need for fund manager to dispose, it will cause the particular reit price being depressed.
Reit is not as same as ordinary stock, even the overall market is bullish, reit upside potential is capped by its property valuation and its rental income. So if rental income won't improve too much, there is no reason for reit price to go up like ordinary stocks.
Reit locally generally won't move in tandem with general stock market trend one. They generally move based on its fundamental suggesting.
Reit is not kena dumped across. Just they shouldn't up too much way beyond its fundamental.
While since Australia raise interest rate, there is talk about some central banks are considering to hike interest rate. If interest going up (FD rate), the differentiate in yield between reit and FD become smaller, and less attractiveness for fund managers.
Only if property price going up or rental income increment, it only justifies reit price to go further up.
The only part I agree with is the part where interest rates will affect REIT prices.
REITs do follow market sentiment, if they did not they wouldn't have collapsed so spectacularly during the market crash. The fundamentals were unchanged during that period.
With a yield of around 8% in most REIT's right now I think it's still a relatively safe place to park your money.
Those who love highly geared REIT's like AXREIT should take note that AXREIT has almost maxed out their 50% debt available to them. If interest rates come up, not only are they going to look less attractive, their going to have to pay back all the money they were borrowing from the bank. Unless they got fixed rate or something like that, which doesnt seem likely.
Aug 7 2009, 06:14 PM
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