Property Investing still the way

Regardless of what the doomsayers’ may make you think, investing in property over the past 10 and 20 years is still very much a winner when compared with other asset classes including shares, a new report has found.

Peak industry body Australian Direct Property Investment Association (ADPIA) has commissioned a report that shows over the 10 years from 1997 to December 31, 2007, direct property provided strongest returns, highest distributions, lowest volatility and best risk-adjusted returns in comparison to other investments such as stocks and managed funds.

The report compares property returns with that of other typical investments such as shares, listed and residential property, cash, fixed interest and managed funds.

ADPIA president, Linden Toll, says investors should be reminded of the long-term nature of investing in the property market."There is no doubt that there has been tremendous turmoil in investment markets over the past 12 months," he said."And the property market has been no exception. However, direct property is unique in that valuations are not sentiment driven.”

"It is therefore less likely to suffer the dramatic highs and lows of other markets and generally has a low performance correlation to other asset classes, which makes it ideal for defensive investment within a balanced portfolio." Toll said.

The report, which was done by research and consulting Group Atchison Consultants, shows that direct property provided yearly returns of 11.8 per cent over 10 years and 9.1 per cent over the past two decades. It has also provided income returns of 7.1 per cent a year over 10 years and seven per cent over 20 years.

"Importantly, it did this at the lowest level of volatility and lowest downside risk of any other investment," Atchison Consultants managing director, Ken Atchison, said. Mr Atchison believes the timing of purchases and sales in direct property is less demanding than listed growth assets. "High volatility means that total returns can be greatly diminished by poor timing of purchases and sales by investors introducing loss aversion and subsequently poor transactions," he said.

He said the study showed that investors should increase their property allocations from between five and 10 per cent to 20 per cent in balanced, growth and high-growth portfolios.

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