Listed property investments are coming back into favour with the latest results from the NZX property gross index likely to fuel investor sentiment.
Forsyth Barr broker Tony Conroy said the index was up a massive 17.3% in the September quarter compared with a 13.5% rise in the NZX-50 gross index.
"Buoyed by improved investor confidence and rebounding equity markets, listed property enjoyed a very strong quarter."
There was a strong recovery by the more heavily oversold listed property vehicles (LPVs) such as National Property, ING Property and Kermadec.
Both AMP NZ Office and Kiwi Income Property recovered from weak June quarters that were affected by respective capital raisings, he said.
The major movers in the September quarter were National property (up 38%), ING (up 33%) and Kermadec (up 27%).
The worst were ING Medical Properties (down 1.5%) and Property for Industry (up 2.6%).
Both of those were trading at a sizeable premium to the sector at the start of the quarter, Mr Conroy said.
ING Property was the stand-out performer for the year ending September, rising 27% in value.
With markets recovering, there had been increased interested in listed property.
Mr Conroy believed investors had increased confidence that the property trusts would be able to work through the property downturn in terms of managing balance sheets without large scale equity issuance, while at the same time sustaining a high level of dividend yield.
With the continuation of low interest rates, investors were again starting to focus on the attractive tax-free PIE (property investment entities) provided by the LPVs, he said.
"While confidence has improved, we still expect the sector to continue to trade at a discount to our estimate of fair value, given uncertainties around rental levels, vacancies and asset values despite a further substantial pull-back in property values already priced into share returns," Mr Conroy said.
Residential property also appears to be finding favour with investors.
A survey run by Mike Pero Mortgages and Landlords.co.nz yesterday showed that residential property investors had changed their views on what house prices would do in the next six months.
A survey of more than 550 property investors found 44.6% of respondents expected house prices to increase over the next six months, a substantial increase on the previous survey.
Mike Pero chief executive Shaun Riley said property investors appeared to have changed their views from the last survey conducted three months ago.
At that time, only 11.8% of respondents thought prices would rise.
The change in sentiment had been mainly a shift from those who thought prices would fall as opposed to those expecting no change.
In the latest survey, investors felt it was getting harder to find quality properties in the current market, he said.
"This fits with reports coming out from the real estate industry showing the volume of housing stock in the market is down on recent years."
Survey respondents also felt there was a major change in relation to rental properties.
"Here, the emerging view is that rents will start increasing.
"There has been an increase in the number of investors who said they had increased their rents in the past six months and there was a corresponding drop in the number who said they never increased their rents."
