Australian Real Estate Investment Trusts (A-REITs) outperformed the stock market in May with thanks to a Coalition win, and bonus from APRA.
Heading into the May 18 election, investors had positioned for a Labor win. This meant reducing or selling positions that paid franking credits, and reducing exposure or not spending on anything to do with housing. The issue for the housing market were proposed changed to Capital Gains Tax, and negative gearing. This was on top of a tightening credit landscape where ASIC was warning banks about ‘responsible lending’ earlier this year, and last year’s Royal Commission.
With the election over and tax certainty back, investors bought back stocks that were shorted or perceived to be affected. Not long after, APRA also announced they’d reduce the mortgage serviceability rule of stress testing repayments of 7.25% on new loans. This was all a boon for the A-REITS, especially housing related stocks like Stockland. Stockland finished 17.5% higher and Mirvac was up 7.1%.