Global REITs to deliver 8-12% returns in 2011 underpinned by economic improvement and dividends, says INGIM
Global Real Estate Investment Trusts (REITs) are expected to continue to deliver positive returns for the third year running, as an improving global economy and growing dividends help them continue to emerge from the financial crisis, according to the 2011 global property securities outlook from ING Investment Management (INGIM).
According to the report, total returns from REITs are expected to be in the 8-12% range this year, as dividends grow and continue to be an important component of total return. The primary driver of real estate company returns will be growth in cash flow per share.
Rising interest rates need not be feared, as listed real estate often delivers positive returns in periods of economic improvement, even if interest rates rise, according to the report. The year will also see large scale IPOs emerging out of the US.
Region by region, in Asia Pacific, Hong Kong property companies are expected to outperform over the next 12 months, growing earnings by 15-20% and producing dividend yields of 2-3%. Japan should deliver a total return of 5-10% and Singapore 10-15%.
In Europe, Western and Northern Europe are believed to represent more attractive investment opportunities compared to Southern and Eastern Europe, with a 5-10% total return expectation across Continental Europe over the next 12 months and a 5-6% dividend yield. The UK is expected to deliver a total return l of 8-12% over the next year.
North America should see total returns of 8-12% in the US and Canada. In the US, property investment is predicted to be helped by economic recovery as a result of fiscal and monetary stimulus, although the continued depressed housing market and high unemployment remain as obstacles.
While property markets are at different stages in the real estate cycle, the earnings growth trend remains positive according to the report.
