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Is VAP a cheap ETF buy staring investors in the face?

Could Vanguard Australian Property Securities Index ETF (ASX: VAP) be a cheap opportunity staring investors in the face?

About VAP

This ETF looks to give investors a cheap way to invest across various real estate investment trusts (REIT) including retail, office, industrial and ‘diversified’.

At 31 July 2020 it had 29 holdings. Its biggest 10 holdings were: Goodman Group (ASX: GMG), Scentre Group (ASX: SCG), DEXUS Property Group (ASX: DXS), Mirvac Group (ASX: MGR), Stockland Corporation Ltd (ASX: SGP), GPT Group (ASX: GPT), Vicinity Centres (ASX: VCX), Charter Hall Group (ASX: CHC), Shopping Cntrs Austrls Prprty Gp Re Ltd (ASX: SCP) and Charter Hall Long WALE REIT (ASX: CLW).

It has an annual management fee of 0.23%.

Other similar ETFs

Another Australian property ETF is VanEck Vectors Australian Property ETF (ASX: MVA). It has similar holdings, though with different holding percentages, with a management cost of 0.35%.

How has the ETF performed?

Source: Best ETFs VAP 10-year share price chart.

According to Vanguard, It has delivered average returns per annum of 9.74% since the ETF’s inception in October 2010.

Why it could be a cheap opportunity

The VAP share price is still down by around 25% from the original COVID-19 crash. Property share prices, particularly shopping centre ones, remain subdued due to the impacts of COVID-19.

Some property businesses have recognised a reduction in property valuations. For example, Scentre recently recognised a $4 billion valuation drop across its portfolio.

However, if you/Vanguard takes the REIT property valuations as correct, then at 31 July 2020 it had a price to book ratio of 0.9x. That means, investors could buy $100 worth of property REITs through VAP for $90. That’s an attractive 10% discount after recent revaluations.

If you think a 25% reduction of VAP is a fair price, or good price, then it could be a cheap opportunity. However, the rise of e-commerce could mean that shopping centres don’t quite recover.

But there are plenty of other ETFs out there for growth and/or dividends. Check out our list of ASX ETFs.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

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This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

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From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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