Direct real estate delivers handsome return

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Direct real estate continues to boom, with a 16.9% return recorded in the 12 months to the end of June, according to new data from the Investment Property Databank (IPD) and the Property Council of Australia.

 

“The continued strength of the direct market reinforces the importance that real estate plays in a balanced investment portfolio,” said IPD’s Australian director John Garimort.

 

“With an annual return of almost 17%, I suspect that balanced investors and those overweight to the real estate will be quite pleased with their positions.”

Australian office property delivered a 17.5% total return in the last 12 months, followed by retail with 17.3% and industrial with 11.8% – more great news following nine years of double-digit returns.

“Over the last decade, real estate has delivered annualised rates of return very similar to listed equities ... with much lower volatility and reduced investor risk,” said John Nguyen, national research manager for the Property Council of Australia.

“Given the recent fluctuations in world financial markets, we could see an increasing allocation to real estate as investors get off the equities rollercoaster,” he added.

The data also shows that property yields continued to fall, meaning that prices were rising for assets generating fixed rental incomes.


It also underlines the low correlation between Australia’s property cycle and several markets in western Europe, where yields have begun to soften as oversupply and increases in the cost of borrowing reduce demand. For example, UK commercial property returns slipped to 0.17% in July, their lowest monthly level in 12 years.


The data was based on sample on the performance of 700 assets with a total value in excess of $82bn.

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