March 4, 2021

Economic rebound underpins strong market performance.


The Partners Fund continues to benefit from improving conditions.

The Australian economy has rebounded strongly, growing 3.1% in the December quarter, resulting in strong commercial real estate asset price performance and healthy market activity. Several sectoral themes have been in focus in the aftermath of COVID-19 and continue to develop momentum, including the outperformance of regional housing markets and the englobo (undeveloped) land market.

These market segments have benefited from similar factors, including the HomeBuilder grant and the popularity of remote working and lifestyle factors, resulting in a demographic shift to outer suburban and regional living. Over the year to end-February, the Corelogic regional housing price index rose 9.4%, significantly higher than the combined capital city index which rose just 2.6%. This is driving demand for land, which is also performing well. RPM Real Estate noted it had sold $140m in off market englobo land in Victoria in the December quarter, up 40% on the previous quarter and in line with similar trends in other states. The attraction of regional growth areas is expected to continue over the medium term, sustained by the demographic shift and continued investment in transport infrastructure.

Agricultural conditions also remain supportive for our loan performance. In its March quarter Agricultural Commodities Report, ABARES forecasts a record gross value of agricultural production of $66 billion in FY21, boosted by the second-biggest winter crop on record and modest price rises. ABARES notes the major positive impact has resulted from the recovery from drought and external demand for red meat, which have more than offset the challenges posed by labour shortages, border closures and lockdowns. After a modest drop in FY22, the gross value of production is forecast to remain above $60m in nominal terms, with more upside potential than downside, over the medium term.

The combination of stable asset prices and health investment activity will ensure the continued performance of the Partners Fund along with a strong pipeline of future investment opportunities.

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