Insights

Why ASX-listed property shares could be on the chopping block

A top broker has cut its price targets on Australian REITs but also sees some opportunities in the sector.
The post Why ASX-listed property shares could be on the chopping block appeared first on The Motley Fool Australia. –

Top broker UBS has reduced its price targets on Australian real estate investment trusts (REITs) by an average of 15% but also says it’s time to buy a couple of the biggest names.

The ASX Australian REIT (A-REIT) sector includes Charter Hall Group (ASX: CHC), Charter Hall Retail REIT (ASX: CQR), Charter Hall Long WALE REIT (ASX: CLW), Centuria Industrial REIT (ASX: CIP), Goodman Group (ASX: GMG), Stockland Corporation Ltd (ASX: SGP), and BWP Trust (ASX: BWP).

Which ASX property shares does UBS like?

According to reporting in The Australian, UBS has raised its rating on Centuria Industrial to a buy. This follows a 30.5% fall in the Centuria Industrial share price year to date.

The broker also gives ASX investors the green light on Charter Hall Group. UBS reckons it’s time to buy Charter Hall shares, which have dropped in price by 47.5% in 2022.

The UBS team has also raised its rating to neutral on BWP Trust shares. The A-REIT stock has lost 7.8% in value in 2022.

And finally, UBS has expressed some pessimism about Shopping Centres Australasia Property Group Ltd (ASX: SCP) shares. The team has lowered its rating to neutral. The Shopping Centres Australasia share price is down 10% this year so far.

A-REITs underperform in 2022

The news report notes “material sector underperformance” for ASX property shares this year.

The S&P/ASX 200 A-REIT Index (ASX: XPJ) has lost 25% in 2022, underperforming the broader benchmark S&P/ASX 200 Index (ASX: XJO) which has fallen 14%. But it’s better than the ASX tech sector, with the S&P/ASX All Technology Index (ASX: XTX) down 40%.

UBS analyst Grant McCasker said: “As extraordinary policy settings normalise and inflation emerges, markets are increasingly pricing in negative outcomes [including] a potential recession or stagflation.”

Rising interest rates to hurt A-REIT profits

McCasker thinks A-REITs will lose profits over the next three years due to rising interest rates.

The article said McCasker has reduced his forecasts for sector earnings over FY23 to FY26 by 5%.

The loss in earnings will be “marginally offset by inflation-linked leases; FY23 asset devaluations of
about 8 per cent for real estate fund managers; and a more severe residential downturn”, the article said.

The latest monthly CoreLogic report revealed national home values fell for the first time since September 2020 last month. The national fall — which was only 0.1% — was led by Sydney and Melbourne.

These two markets began to cool earlier in the year. Home values are down 0.9% and 0.6% respectively.

The post Why ASX-listed property shares could be on the chopping block appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of January 12th 2022

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Here are the 3 most heavily traded ASX 200 shares on Wednesday
How attractive is the Santos dividend right now?
‘Price makers’: 3 ASX 200 shares that can pass on rising costs in an inflationary environment
Has 2022 proven Woolworths is a defensive ASX share?
ASX 200 midday update: St Barbara and Zip drop to multi-year lows

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Shopping Centres Australasia Property Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info