Rising debt costs limiting near-term earnings for Australian real estate sector - Citi

Stockland

07/09/2022 01:16

** Citi says rising debt costs are limiting near-term
earnings growth for Australia's real estate sector, despite
increased hedging, with only a few stocks expecting growth into
next period 
    ** Says Goodman Group  GMG.AX , Mirvac Group  MGR.AX  (both
rated "buy")and Vicinity Centers  VCX.AX  (rated "neutral") are
exceptions where most stocks are expecting declines in earnings
over next 6-12 months   
    ** Adds that capitalization rates have continued to compress
but at a slower rate, during this period; forecasts cap rates to
expand over the next two years by 50-80 bps
    ** Says REITs increased hedging during the results in order
to provide earnings certainty over the next two years and higher
defensiveness of earnings amid anticipated rising interest rate 
 
    ** Citi says retail real estate continues to recover from
COVID, with some questions marks around longer-term impact from
a weaker consumer, but remains optimistic with a "buy" on
Shopping Centres Australasia Property Group  SCP.AX 
    ** Says residential market is softening but strong pre-sales
indicates potential upside to conservative FY23 volume guidance
for both Mirvac and Stockland Corp  SGP.AX 

 (Reporting by Jaskiran Singh in Bengaluru)
 ((Jaskiran.Singh@thomsonreuters.com;))