Investing in property over the past 10 and 20 years is still a winner compared with other asset classes including shares – a new report shows.
Peak industry body Australian Direct Property Investment Association (ADPIA) commissioned a report that shows over the 10 years to December 31, 2007, direct property provided strong returns, highest distributions, lowest volatility and best risk-adjusted returns.
The report compared property returns with that of shares, listed and residential property, cash, fixed interest and managed funds.
ADPIA president Linden Toll said investors should be reminded of the long-term nature of property investing.
“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.”
The report, by research and consulting Group Atchison Consultants, showed that direct property provided annual returns of 11.8 per cent over 10 years and 9.1 per cent over the past 20 years.
It 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 said the timing of purchases and sales in direct property would be 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 be increasing property allocations from between five and 10 per cent to 20 per cent in balanced, growth and high-growth portfolios.
ADPIA represents the interests of investors and managers of direct property that invest in managed property and property syndicates.