Share prices of the biggest Australian real estate investment trusts (A-REITs) have risen in Friday's trade and look set to close out a strong week in the real estate sector.
The GPT Group (ASX: GPT) share price, Mirvac Group (ASX: MGR) share price and Stockland Corporation Ltd (ASX: SGP) share price were all up over 1% in afternoon trade as Australian real estate continues to maintain asset quality and earnings.
What's driving Friday's moves?
It's difficult to say, but I would put my thumb on today's GDP forecast cut by the RBA which indicates the central bank may be leaning towards a cash rate cut later this year. Other significant factors would be the less-than-damning final report from the Financial Services Royal Commission and a strong earnings result from Mirvac on Thursday.
The RBA announced a cut in its GDP growth forecast from 3.25% to just 2.5% through to June 30 as the central bank becomes notably more dovish. This comes after the bank downgraded its economic outlook for Australia on Tuesday, meaning an RBA cash rate cut looks likely for August or September this year.
On the Royal Commission front, had Commissioner Kenneth Hayne's final report included some hard-hitting recommendations, I would have expected to see the A-REITs drop this week on fears of a credit crunch and property plunge. However, with little financial impact set to come from the report, property stocks were buoyed this week with a credit crackdown by the banks looking less likely.
So where should I put my money?
At this point in the cycle, I think it's hard to make a case that the A-REIT sector or real estate, in general, has a lot of growth left. While Mirvac's results on Thursday were solid, many of the property indicators are lagging and should flow through in the next 6-12 months.
I'd be turning towards non-cyclical or countercyclical stocks such as Wesfarmers Ltd (ASX: WES) or Seven Group Holdings Ltd (ASX: SVW) in the meantime.
