From the AFR:
The owners of Australia’s $117 billion listed real estate sector are expecting the market to ‘correct’ and have kept their gearing to historically low ranges in anticipation of this according to feedback received by S&P Global Ratings.
At event in Sydney on Tuesday where the impact of tighter credit on property prices was discussed, S&P’s REITs analyst Craig Parker highlighted how groups such as Dexus and GPT had gearing levels below their stated policy ranges as a defensive measure against a reversal in asset prices.
Most of the REITs had gearing levels in the mid-20 per cent range compared with the low-40 per cent range they had before the financial crisis wrecked the sector forcing major asset sales and recapitalisations.
My own experience has been that after launching the Nucleus funds a year ago with a firmly anti-property bias in the stock selection, I have been surprised by the number of property developers who signed up as clients.
For a minority of these property developers, it has been simply a diversification strategy. For the majority though it has been about trying to:
- get their money out of the property sector
- protect the profits they have made over the last ten years
Here is what ASX listed property companies have been doing on the debt front:
And I don’t know of any that are using the current declines in property prices to gear up and buy the dip.