Interest rates are at or near all-time lows in Europe, the US and Japan. Lower borrowing costs have some market commentators concerned about runaway property prices, but importantly we are seeing proof that the cheap cost of debt is leading to some economic growth and asset appreciation in these major economies.
Solid economic growth and rising property values in the US and Japan (less so in Europe) makes now an interesting time to consider investing in companies that provide exposure to overseas residential and commercial property.
Westfield Corp (ASX: WFD) was recently formed to house the US and UK assets of the greater Westfield Group. The group has 40 high-quality and well-placed shopping centres throughout the United States, United Kingdom and Europe that are valued at nearly $27 billion.
The majority of group assets are based in the US and as a result Westfield Corp is well placed to benefit from a revival of the US economy and improving consumer sentiment.
Similarly in Japan, economic stimulus in the form of low interest rates and the slashing of economic red-tape is finally freeing the country from 20 years of little to no growth. Asset prices are rising and the country’s gross domestic product is increasing, giving confidence to consumers and businesses that is ultimately spurring further economic growth.
Two companies well positioned to capitalise from this theme are Astro Japan Property Group (ASX: AJA) and Galileo Japan Trust (ASX: GJT). These two real-estate trusts invest in residential and commercial/office Japanese real estate.
A major benefit of these two groups is that unlike listed real-estate investment trusts that own Australian property, these two companies are still trading well below their net tangible assets.
This may well be due to uncertainty surrounding the future of the Japanese economy, the conpanies’ small size (<$300 million market cap), or a home-bias from Australian investors, but a 30% discount to current assets indicates that these two could be bargains if the Japanese economy continues to improve.
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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie