Over the past 15 years, income has accounted for around three quarters of real estate’s total return. Even over the past five years, when capital values have been rising steadily, income has still accounted for half of the return enjoyed.
Importantly, as the capital cycle plays out, income displays both longevity and growth at the index level at least. While income is an important driver of returns in the physical market, returns in the listed sector have been driven by price appreciation (driven principally by NAV growth) rather than dividends. However, we believe that behavioural change is underway, expedited by the appetite for income from investors and boosted by IPOs with a clear bias towards income returns.
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