In just a century, we’ve shifted from horse drawn ploughs to GPS guided tractors. Technology and innovation is hurtling forward at an unprecedented rate, and disrupting many industries along the way. Real estate is no exception. From the home office takeover to smart warehouses, UBS looks at what you can expect to see in the next few years on Earth, and the distant future on Mars.
A cursory look at the headline performance of the Australian real estate investment trusts (A-REITs) sector, would suggest all is not well. The S&P/ASX 300 A-REIT Index posted a total return of -5.6 per cent in the year to 30 June 2017, underperforming both the equities market and the underlying direct property market. However, as Adrian Harrington of Folkestone explains, headline Index performance can be deceiving.
Australian Real Estate Investment Trusts (A-REITs) performed strongly in February as underlying real estate values were pushed higher. However, as Folkestone warns, now is not the time to get complacent and invest in index funds as it expects A-REITs Securities Funds that take an active approach to stock selection to outperform the index in the year ahead.
The popularity of investing in listed infrastructure has risen significantly over the last few years. New factors are set to drive demand even further and we believe that it is inevitable that global listed infrastructure will be recognised as its own unique asset class. We view the asset class as being at a similar stage of its development to where real estate investment trusts (REITs) were in the 1980s.
Achieving a ‘model’ portfolio in property is difficult if not impossible because of the singular high cost of each property. If you recommend an asset allocation to property of, say 20 per cent it is certainly impossible to acquire multiple properties unless the value of the underlying portfolio is in the millions, or a very large debt is created.
As with other professional disciplines like accounting, legal, risk, finance and broking, property is a specialist field, but not a daunting one. In the same way you engage a solicitor on estate planning matters or a stockbroker to create an equities portfolio for a client you can engage a buyers agent to help in the property selection process. Good agents are qualified, carry PI insurance, are members of a reputable organisation and most of all don’t sell property – they buy it. So you need someone who is research based and able to demonstrate a sound methodology.
Finding a good property to invest in requires solid quality research. Whilst fear and greed can influence share price movements, unfortunately, it is predominately the emotional connection that people have with property which frequently sways their investment decisions.
Asset allocation is an investment strategy designed to balance risk and reward by diversifying across the major asset classes – property, equities and cash/fixed interest – each of which performs differently over time, known as cycles. When one asset class is up, another may be down.
The fractional property investing model gives you the tools to offer your clients all the benefits of a prudent investment strategy within the property asset class with a reasonable acquisition cost and ongoing holding costs.
Fractional property investing (FPI) is a method of acquiring an interest in real property of the investor’s choice without having to purchase the whole property.
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