Australian unlisted core wholesale property funds delivered a total return of 8.8 percent, after gearing and management fees, for the year ending June 2012. This represents a decline of 0.45 percent from the annual return of 9.2 percent recorded for the year to March 2012, according to the Mercer/ IPD Australian Pooled Property Fund Index - Core Wholesale.
Compared to the previous financial year, to June 2011, annual returns have decreased by 1 percent from 9.8 to 8.8 percent, the index says.
The average annual distribution yield for wholesale core property sector ast June 2012 was 6.0 percent.
Anthony De Francesco, IPD Australia and New Zealand managing director, says results signal softening in the unlisted property market.
“This is consistent with the moderating investment returns for property as reported by the Property Council/ IPD Australia Commercial Property Index. The moderation in investment returns reflects weakness in demand-side factors for underlying space market fundamentals,” De Francesco says.
The index says diversified funds posted the strongest year to June 2012 return, of 9.1 percent. Retail funds posted an 8.7 percent return and office funds returned 8.5 percent. Industrial funds posted an 8.0 percent return for the year to June 2012.
Retail sector funds have outperformed diversified funds over the last five-year period, according to the index. However, Peter McGuinness, IPD Australia and New Zealand research manager, says given ongoing weakness in retail turnover it is likely retail sector funds will underperform.