Volatility besets real estate trusts

RESIDENTIAL and retail-focused real estate investment trusts have been sold down over the past week, amid concerns of a flat pre-Christmas trading and home sales period.

RESIDENTIAL and retail-focused real estate investment trusts have been sold down over the past week, amid concerns of a flat pre-Christmas trading and home sales period.

For the first time in recent months, the REIT sector posted a 1.1 per cent decline in average prices. However, it still managed to outperform the general equity market, which fell by 2.8 per cent.

According to brokers, the harder hit stocks included FKP and Australand, which have exposure to the volatile retirement and residential sectors.

Brokers at Bank of America Merrill Lynch said the risks for Australand were a protracted downturn in the residential markets or continued poor consumer sentiment, development margin contraction and increasing portfolio vacancies. But they said the stock's upside is a strong recovery in residential markets and quicker than expected leasing of new developments.

For FKP, they saw a similar downside and a sharp improvement in residential markets and buyer sentiment towards second-tier investment property on the upside.

The standout for the sector was Mirvac, which reported strong buyer interest for the second stage of its Harold Park development in Glebe, Sydney.

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