My Take In SReit Outlook for 2015-2016
SReit has certainly helped me to build my nest bigger for the past few years. It is not just the capital gain but the consistent quarterly paid out dividends which attracts me. For the whole of 2014, the returns from my Sreit investment is generally not too bad, i.e. approximately about 7% return.
However, with the recent news release by US Labor Department that US Payrolls continued to grow by an adjusted 295,000 jobs in Februrary, it marked the 12th straight month the economy added more than 200,000 jobs. Due to this continual growth since 1995, US unemployment rate fell to 5.5%, the lowest level since May 2008.
When US Economy is recovering, my next worry will be whether Federal Reserve will increase the interest in the second half of this year? If Federal Reserve increases the interest rate, our local SOR and SIBOR will also increase in tandem. This will result higher borrowing costs and slimmer corporate profits. So what will happen to the debt ratio and the gearing ratio of the SReit? The answer may be quite obvious.
It is not just the concern of higher cost of operations but other factors such as tighter labor market situation and shrinking tourism market especially with a reduction in the number of China tourists, it may further impact the local retail sector and tourism. All these will further lead to a downward trend in office and retail rental and hence affecting the returns of the Sreit.
Many have enjoyed extra-ordinary low interest since the market recovery after sub prime crisis. Many still believe that US will not adjust the interest rate too abruptly as i noted from various property forums. In my opinions, the downtrend of Sreit prices and returns may be happening gradually in the second half of 2015 and becomes more obvious in 2016. Will start to cut my investment portfolio in Sreit in the next one or two months to acquire more in Aussie dollars.
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