After a period of stunning gains, the Australian Real Estate Investment Trust (AREIT) sector has lost a little steam this year. Value is still hard to find, but price weakness or consolidation in key AREITs is creating better opportunities for long-term investors.
The AREIT sector needed a breather. The S&P ASX 200 AREIT index soared more than 30% from January 2014 to February 2015. As with other interest-rate-sensitive sectors, the rally was driven more by sentiment than fundamentals at the peak.
Near-zero interest rates and a lower Australian dollar overseas enticed international investors to buy Australian property and drive prices higher. Also, record-low domestic interest rates encouraged income-seeking investors to buy AREITs for yield.