Real es­tate v shares

In the shadow of the fi­nan­cial down­turn, prop­erty is look­ing more at­trac­tive to in­vestors, re­ports

The Advertiser - Real Estate - - House Hunter -

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.

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