The COVID-19 impact on Mortgage Trusts

The Australian property sector is facing uncertain times following the COVID-19 pandemic that has seen dramatic changes to our residential and commercial markets. The question is whether the changes will be short term, and snap back to pre-COVID, or result in a fundamental reshaping of one of the major drivers of the Australian economy? Concerns about the pandemic effect on office, residential and retail markets in particular are yet to wash through the market.  Will cities be left with empty office buildings as corporations rationalise office space through the use of working at home and hot desking? Will we have vacant shopping centres for years, as the huge uptake of online shopping is putting further pressure on bricks and mortar retailing? In addition, the fall in migration will have a long-term effect on the residential market as housing starts slow or will the billions in stimulus keep it active? Will these changes affect the Australian mortgage trust market and reduce the attractive yields that have been attracting billions of dollars in the past 12-24 months? At this stage it appears this uncertainty will not be an issue.

One of the key factors underpinning the mortgage sector is the withdrawal of the major banks creating an $80 billion funding gap for quality property projects into 2021. It is the established real estate investment trusts (REITs), with major pre-COVID holdings with high gearing that face the major challenges. Mortgage trusts are generally forward looking.  They finance new development (or refinance existing quality property) underpinned by mortgage security and have the ability to pick the sectors that are expected to perform the best.  

In addition, mortgages trusts are short term and nimble with mortgage periods typically from 6-36 months. Boutique mortgage funds, such as the Windsor Capital Core Fund (WCCF), manage investment risk in a number of ways. WCCF is a pooled fund that invests in a spread of quality mortgages to minimise volatility across a variety of property sectors. We take a conservative approach and follow strict in Due diligence guidelines. At present we are seeing an increase in deal flows and it is an excellent time to explore the opportunities of investing in mortgage trusts and diversify your current portfolio. Should you have any further questions or want more information on the Windsor Capital Core Fund please do not hesitate to contact us on 1300 346 782.