This article is from the Australian Property Journal archive
PROPERTY values continued to drop across all specialist fund types in the first half of 2024, with the second quarter bringing in an overall total return of 4.6%.
According to the latest MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index, the driving factor in this decline was office funds, which saw a 8.7% drop in capital growth for Q2 2024 or its worst quarterly performance since June 2009.
Retail funds also recorded a drop in capital growth over the quarter of 2.8%, with industrial funds seeing a decline of 2.6%.
Annual results were also looking bleak, with the overall index total return at -10.4%, the worst results since the months immediately following the Global Financial Crisis.
The downturn was driven by a 13.8% decline in capital growth, which was not enough to offset a positive 4.0% income return.
The top performer over the quarter was retail funds, which saw a total return of -1.6% and income return of 1.2%. With retail funds achieving a total return of -2.5% over the past 12 months.
Industrial funds followed with a decline in value of 8.6% over the last 12 months, for a total return of 5.4%.
“On a positive note, the capital growth decline of 2.6% is less severe than the -5.8% recorded in Q4 2023, indicating that the worst losses may be behind us,” said Ben Martin-Henry, head of real assets research at MSCI.
In annual terms, the office sector brought the worst performance with -16.4%, with a 19.5% decline in value.
“Concerningly, write-downs for office funds appear to be accelerating, with a quarterly decline of 8.7% marking the worst quarterly performance the index has seen in this downturn, more than doubling the losses recorded in Q1 2024,” added Martin-Henry.
“Furthermore, the latest write-downs for office funds have led to a downturn that exceeds the losses incurred after the GFC. The peak-to-trough losses following the GFC were 26.2%, while the current losses have reached 26.5%.”
