Real Estate Investment Trusts - Quality over quantity?
Real Estate Investment Trusts (REITs) have delivered an attractive return relative to their lower volatility over the longer term
The quality of New Zealand property returns has improved over the last 10 years with a higher weighting to industrial assets
New Zealand REIT dividend distributions are now more sustainable, with most dividends now based on conservative available funds from operations definition rather than accounting definitions
ASB increased all its fixed mortgage rates yesterday, including the highly popular one year rate by 0.36% to 2.55%. We expect other major banks to follow, likely marking the end of a multi-year decline in New Zealand mortgage rates.
Many households will soon be exposed to these rates as almost 80% of outstanding mortgages are either floating (12%) or fixed for less than one year (65%).
Further increases in mortgage rates are likely as the economic expansion supports a removal of monetary policy stimulus and higher bank funding costs.
We think households in aggregate can manage higher rates. Debt servicing costs are historically low and there is some evidence that mortgage holders are currently paying off a greater proportion of principal, implying a buffer to rising rates.
