The 6 percent sell-off of listed global real estate stocks since the end of November 2015 is “unjustified by the fundamentals” according to NN Investment Partners (NN IP), the Dutch asset manager.
The firm said low interest rates and encouraging signals from the main drivers of real estate activity “all indicate positive growth in real estate”. It tipped the US housing sector to perform well in 2016 and to contribute positively to US GDP.
NN IP said the case for real estate is supported by easing credit conditions with US Treasury yields below 2 percent and the German Bund yield below 50 basis points. It said the latest European Central Bank (ECB) bank lending survey showed credit standards on loans to households returning to a net easing in Q4.
The real estate sector is also getting a boost from unemployment declines and growing retail sales. Demand for office space is also expected to increase given the labour market trends.
“From an investor point of view, real estate continues to offer attractive yields, especially compared to what is available elsewhere,” said Patrick Moonen, principal strategist, multi-asset, at NN IP.
“Absolute cap rates, a commonly used factor to assess the profitability of real estate, are somewhat about average. This should keep investors’ interest in the asset class alive,” he added.
He said the firm prefers the Eurozone from a regional perspective due to ECB support and that the organisation “will do more if needed”. Further easing is expected this month.