Why Real Estate Debt Appeals to Investors in 2021

Real Estate Debt is becoming increasingly appealing to investors as a viable asset class as markets work through the impacts of the COVID-19 pandemic.

Uncertainty in the Speed of Economic Recovery at a Global Scale

Australia and New Zealand have combated the COVID spread with strong fiscal stimulus and responsive early control measures. This has placed Australia amongst one of the safest countries during the Pandemic and has in the short term, provoked a focus on Australian domestic investments from investors and global asset allocators. In the long term, the economic rebound requires the global supply chains to operate efficiently and foreign capital inflows. The world must embark on economic recovery for Australia to maintain sustainable growth.

Low Correlation Asset Class Underpins Long-term Portfolio Returns

Real estate debt is an attractive asset class in the mixed-asset portfolio due to favourable risk return characteristics and low correlation with other financial asset classes like stock and bonds. Adding commercial real estate debt to a portfolio of financial assets can both reduce volatility and increase long-term returns, especially in times of uncertainty. Furthermore, because debt is not in a first-loss position relative to real estate asset, it can provide protection buffer against volatility if the value of the underlying real estate collateral fluctuates.

Investors Seeking Income in a Low Yield Environment

Domestic restrictions and international border closure have assisted with controlling the spread of the virus, albeit have also imposed damages to local and international businesses. The longer it takes to open borders, deepen the impact. The progressive reduction of government pandemic fiscal support will put more businesses to test. Investors are actively seeking dependable income replacement.

Cash rate globally is close to zero and sub-zero interest rate is presently being debated as a monetary policy tool. Chasing for yield in this low return environment becomes more challenging. Real Estate Debt provides an investment alternative with appealing returns without over stretching on risks. In addition, real estate debt is attractive to investors for its ability to produce regular current income.

Labassa Capital is an investment manager and active asset manager specialising in real estate asset class. We work with our extensive industry networks and partners to provide our investors defensive investments with compelling returns, portfolio diversification and dependable regular income. If you are a wholesale investor and would like to know more about investing with us, we would like to hear from you.

www.labassa.com (Phone: +61 2 9061 6600 | Email: [email protected])