Whether you are a foreign or local investor, we can guide you into the highly attractive Australian property market.

Invitation to Seminar

Sydney May 26

Why invest in residential property?

21^st century investors have many options available to them.  The battle over property versus shares rages on.  Here are some of the reasons why we believe that direct investment in residential property should have a place in a balanced investment portfolio.

In April 2006 the highly respected firms NERA Economic Consulting and Mercer Management Consulting published an independent and comprehensive analysis of the Australian Residential Real Estate (RRE) market. Their findings included:

• Proven Long Term Returns
  Australian RRE capital returns have averaged 8.3% pa over the whole period for which national data is available (1982 to 2005), and a total return (including both capital gain and rental yields) of 14.8% pa.  This asset class performed better on a risk adjusted basis than shares, government bonds or listed property trusts;
• Low Volatility
  RRE returns have demonstrated very low volatility compared to other asset classes, making RRE and extremely safe long term investment.  Residential property prices are underpinned by home owners (the biggest share of the housing market at 70%).  Home owners are most unlikely to sell their homes due to the ups and downs of the economy.  Property investors get the benefit of this stability
• Diversification
  RRE cycles in Australia show low correlations with other financial investments such as shares bonds and cash. This means that when the share market is down, property markets are generally in a growth stage.  This makes RRE an excellent means of improving portfolio diversification.
• Future Fundamentals
  The fundamental determinants of RRE supply and demand are expected to continue to support strong returns into the future. Key amongst these is the relatively fixed supply of land with desirable RRE amenities and the ongoing growth in both population and incomes.

These results were mirrored in the  ANZ Australian Property Outlook 2008 which found that:

• As an asset class, housing has continued to deliver remarkably strong and relatively stable investment returns.  In raw terms, since 1984, residential property has enjoyed an extraordinary compound annual total return of 13.4%, only slightly below that of equities (13.8%) and far above both commercial property (10.3%) and bonds (9.4%).
• Over the past 23 years at the national level, house prices have virtually never fallen with the greatest annual falls being just -0.3% in the depths of the early 1990s recession and -0.9% in 1996.
• In risk-adjusted terms, residential property has delivered vastly superior returns to all other broad asset classes. In risk-adjusted terms since 1984, residential property returns have more than tripled those of equities and more than doubled those of commercial property and government bonds.
• More recently, total returns on residential property have accelerated, underpinned by a sharp tightening in the housing demand/supply balance that is driving both rents and house prices sharply higher.  Heightened uncertainty in global credit markets following the meltdown in US sub-prime mortgages has seen risk aversion rise sharply.  Fears of recession in the US will continue to weigh on global equity markets and a ‘flight to quality’ will add to the weight of money that is driving residential (and other) property markets higher.  Using a simple volatility adjustment more fundamentally, a severe and potentially intractable shortage of housing will continue to drive house prices and rents sharply higher in the years ahead.