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Moody's upgrades outlook for real-estate investment trusts

Moody's Investors Service has revised its outlook for Australia's real-estate investment trusts (A-REITs) from negative to stable, as it flags a firming in fundamental credit conditions for the sector over the next 12 to 18 months.

"There are clear signs that the business conditions for the A-REIT sector are stabilizing, with Australia's economy outperforming expectations of earlier in the year, and avoiding a recession," Moody's vice president, Clement Chong said.

"Other reasons behind the improved business conditions include better prospects for unemployment, better consumer and business sentiment, and lower supply in key A-REITS segments," Mr Chong said.

Moody's did warn that demand is still fragile, and recovering from a low trough.

"Despite that, we do not expect vacancy rates to deteriorate materially, and we believe that asset values are nearing the end of their declines," Mr Chong said.