Real estate v shares
In the shadow of the financial downturn, property is looking more attractive to investors, reports
IF you are a first-time investor, it can be difficult to decide between property investment or buying into the share market. There are pros and cons of each but property, especially following the global financial crisis, continually proves to be a more stable investment.
Recent reports show that residential real estate is worth more than $3.4 trillion or 2.5 times the value of the stocks listed on the Australian Stock Exchange, making it the nation’s single largest investment asset class.
Ironfish managing director Damon Nagel says that in a balanced investment portfolio, there’s room for both shares and property.
‘‘As a property investment consultant with my own portfolio, I am probably unsurprisingly a strong advocate for investing in property,’’ he says.
‘‘Property is a solid performer over the long term and one of its main advantages is the control that investors can exercise over their investment.
‘‘At Ironfish, we’ve also witnessed the stability of property becoming increasingly attractive to people with self-managed super funds looking to diversify their investments and minimise the risks associated with a shares-only portfolio.
‘‘With the right structure, there are significant benefits to be derived from investing in property with super.’’
He says he has noticed shareholders are becoming frustrated with executives in companies being rewarded despite poor results and a falling share price.
‘‘The recent performance of the share market has led more people to exploring property investment, which has remained fairly resilient during the recent downturn,’’ he says.
‘‘People always need somewhere to live and rental demand in South Australia remains strong, which is good news for investors.
‘‘More than 30 per cent of residential property in Australia is owned by investors and is attractive because you’re typically able to borrow more against bricks and mortar to build a portfolio.’’
Mr Nagel says that while you may need to save more for your initial investment for property, banks will lend you more.
‘‘Banks will lend around 80 per cent on property but only 50 or 60 per cent on shares,’’ he says.
Funds SA chief executive Richard Smith says a balanced portfolio is the key to long-term investments.
‘‘Our strategy is very much based on the time horizon for the investor,’’ he says.
While Funds SA does not invest in residential property, each portfolio includes investment in commercial and retail real estate with portfolios typically having 8 to 10 per cent divided equally between commercial and retail, Mr Smith says.