The possibility of interest rates rising in the next financial year has also been raised, which could affect debt management and levels.
Forsyth Barr broker Lyn Howe said, for the year to date, the listed property vehicle sector had returned 5.7%, well behind the NZX50 gain of 18.5%, although still ahead of ASX property stocks which have risen just 0.2% during the same period.
``The listed property vehicle sector continues to be stuck in a holding pattern as the broader market rallies, meaning relative value metrics have widened,'' Mrs Howe said.
Forsyth Barr's preferred exposures had not changed during the past month, still being Stride Property, Investore and Goodman property while, of the total 10 companies, Kiwi Property and Vital Healthcare were the least preferred property vehicles.
Mrs Howe said Stride Property and Investore had been ``broadly flat'' during the past month, which was in line with the sector in general, but they had materially underperformed over the past year.
``Both stocks now trade at a material discount to peers and look attractive on a relative value basis,'' Mrs Howe said.
Despite strong performance in October, Goodman Property remained Forsyth Barr's preferred exposure in the industrial segment of the market which continued to be underpinned by record low vacancy levels and continued capitalisation rate compression.
Mrs Howe was still ``bearish'' on the outlook for retail property, which underpins Forsyth Barr's continued recommendation on Kiwi Property, with an ``underperform'' rating, as it had 68% retail exposure by asset value.
While Vital Healthcare had an attractive portfolio with defensive attributes, alongside a strong management team executing well on strategy, its stretched valuation metrics were becoming increasingly difficult to justify, she said.
Full year 2018 would be ``the end of tailwinds'' from interest cost savings, Mrs Howe said.
``We expect a flat cost of debt for most listed property vehicles in the first half of 2018, meaning lower interest rates will no longer provide a sticking plaster for softer revenues, as they have done in recent years,'' she said.
Coming under scrutiny will be company commentary on how debt profiles were being managed, given only one listed property vehicle, Argosy Property, has refinanced its bank facility during the past 18 months.
Seven listed property vehicles will report interim results this month, Mrs Howe said.
``It's been a messy period with a number of stocks being impacted by material abnormal items, making it hard to draw comparisons across the sector,'' she said.
Both Investore and Stride Property will have no comparable figures, compared with the corresponding period last year, since demerging in July last year.
``As a result, the focus will be on how financials are tracking, versus Property for Industry forecasts for these stocks,'' she said.
