According to The Australian Financial Review today, commercial property in Australia, from office towers to hotels, out-performed other investment classes in the year to March, helped by lower interest rates, improving fundamentals in Sydney and Melbourne, and strong offshore demand. The total return for the sector was 14 per cent according to the key metric, the Property Council/IPD Australia All Property Index, which is now managed by MSCI.
The figure, which comprises an average 6.6 per cent income yield and 7 per cent capital growth, has continued to accelerate, with the March quarter one of the strongest for the sector since the financial crisis.
The best performing sectors were the less traditional property classes such as hotels and healthcare. Collectively this "other" class had a total return in the year of 18 per cent.
The figure is based on the income returns and valuation changes on a basket of over 1400 Australian commercial properties worth $157 billion.
And it assumes no gearing. Add finance to the mix and the returns would be even more substantial.
Of the traditional sectors, the office towers performed the best in the March with a total return of 15.1 per cent.
Retail property had a total return of 12 per cent, with a 6.6 per cent income yield and what appears to be a lagging 5.5 per cent capital growth.
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