Fund Performance
Outperforming the Australian Residential Market
Ironstone vs. ABS 6416.0 – House Price Indexes: Eight Capital Cities since Fund inception
January 2008 – June 2011
Quarterly Update – June 2011
Review
Since the inception of the Ironstone Residential Fund in January 2008, the Fund has provided investors with a return of 8.8% pa, more than twice that of the Benchmark (3.6% pa, ABS 6416.0) in the same period.
However, the Australian residential property markets continued to trend downwards in the second quarter of 2011, with the Australian Bureau of Statistics (ABS) reporting a nationwide fall in property prices of 0.1% adding to the 1.7% decline seen in Q1 2011. Individual State capital city performances were mostly negative ranging from -1.6% for Darwin, to -0.1% for Melbourne. However, both Sydney and Canberra bucked the trend with positive growth of 0.4% and 1.1% respectively in the same period.
The Ironstone Residential Fund returned 0.04% for the quarter (net of fees and costs). There were no further additions to the property portfolio of the Fund in the quarter.
Outlook
There are expectations for interest rates to begin to fall due to the continued economic uncertainties in Europe and the US and the recent sharemarket turmoil at home. Potential successive cuts could shave as much as 1.0% off the cash rate by the end of the calendar year.
Although we would not expect the same levels of growth in property values seen in previous years, our research indicates that during periods of sharemarket volatility investors have traditionally sought more stable and defensive asset classes; characteristics offered by quality Australian residential property.
This can consequently improve market sentiment as buyers seek to take advantage of opportunities following a protracted period of property market weakness. This points to a stabilising of property values in the near term and a return to a moderate growth cycle in 2012.
The Fund continues to focus on optimising the values and cashflow of its existing investment portfolio and to seek additional well-located opportunities.
