Yesterday was a stellar day on the boards for the Real Estate Sector as its licked its lips at the prospect of almost zero interest rates until at least 2024. We’ve all seen the housing market turn strongly which has a positive read through for some of the Real Estate Sector but not all-in today’s rapidly evolving business landscape. The Financial Review ran a story today “mass exodus from Sydney CBD doubles vacancy rate” the new 7-year high implies strongly that it’s not going to be plain sailing for everyone in the sector as the work from home (WFM) lifestyle change gathers momentum. However, it’s not just the CBD that’s struggling, hubs like North Sydney have seen their vacancy rate double to almost 17% in just 6-months, money to be made in conversions to apartments me thinks.
Not surprisingly with the huge tailwind of cheap borrowing the forecasts for rising residential property prices have followed suit with some saying 30% in just 3-years, not good news for first home buyers. From a stock market perspective there are lots of moving parts to decide what stocks represent good or bad investments in todays market although much of the new COVID mindset is already built into share prices:
1 – How much exposure do property stocks have to the under-pressure office space?
2 – Shopping malls will need to deliver a real quality experience to offset the new fear of crowds and of course massive growth in e-retail.
Conversely a recovery is unfolding in the “rental collection” market and potentially a number of stocks in this space for example feel cheap considering where we are in the cycle.
Today I have briefly looked at 5 stocks in the space which might suit some investors looking for yield in particular, bearing in mind that we currently hold Abacus (ABP) in our MM Income Portfolio.
