In times of uncertainty it is human nature that we return to the familiar, to what we know we can trust. And for many Australian investors, this often means property.
A tangible asset we can see and feel, you don’t need specialist skills or knowledge to appreciate the intrinsic value of property.
Given the publicity that daily stock market movements receive, it’s no surprise many people believe equities to be our most important investment market. In fact, the $2 trillion invested in listed stocks in Australia is dwarfed by our $8 trillion property market.
While past performance is not a reliable indicator of future performance, the property market is not only far larger but often more resilient than shares.
In Australia this year, the Australian Securities Exchange (ASX) plummeted from a bull market into the fastest bear market in its history, losing almost 40% in value as it dropped to 4,403 points in March, before swinging back to bull again in just a matter of weeks to eventually finish down 11% for 2019-20, its worst performance since 2008-09.
While equities have continued to tick higher since then, experts are divided on what they may do next.
Although the Australian property market has not been completely unaffected by the economic turbulence of the COVID-19 pandemic, the response has been far more subdued.
For example, CoreLogic’s home value index dropped 0.4% over the month of August, but remains comfortably ahead for the year, with 5.8% growth.
Australian home values moved through a fourth month of health crisis induced falls, CoreLogic says, but the rate of decline has eased over the past two months and five of the eight capitals recorded steady or rising values through the month.
Predictions for the future of property values vary, but CoreLogic’s head of research, Tim Lawless, says our property market has remained remarkably resilient through the pandemic thus far.
“The impact from COVID-19 on housing values has been orderly to date, and housing turnover has recovered quickly after its sharp fall in late March and April,” he says.
Of course, housing is not the only component of the property market, which comprises commercial, industrial and retail as well as residential sectors, each of which may perform very differently over time.
Property investment options
Purchasing an investment property directly is not the only way to invest in bricks and mortar.
In addition to high entry and exit costs such as stamp duty, legal fees and estate agents’ fees, managing an investment property and its tenants can be a time-consuming business.
An alternative option to direct property ownership is a mortgage trust or property trust, managed by a professional fund manager, such as the Trilogy Monthly Income Trust or the Trilogy Industrial Property Trust. These trusts aim to provide regular income for investors and are managed by the experienced Trilogy team.
Like all investments, these options have their own risks but if you’re looking to diversify part of your investment portfolio, these alternative property investments could be worth your consideration.
Reviewing detailed product information, researching the various market offerings and seeking advice from a licensed financial planner are three ways to determine if a property trust is worth considering as part of a diversified investment portfolio.
This article was prepared by Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 (Trilogy) and does not take into account your objectives, personal circumstances or needs nor is it an offer of securities. Application for investment can only be made on the application form accompanying the Product Disclosure Statement (PDS) dated 17 December 2018 for the Trilogy Monthly Income Trust and when one becomes available for the Trilogy Industrial Property Trust available from www.trilogyfunds.com.au. The PDS contains full details of the terms and conditions of investment and should be read in full, particularly the risk section, prior to lodging any application or making a further investment. All investments, including those with Trilogy, involve risk which can lead to loss of part of or all your capital or diminished returns. Trilogy is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed adviser to conduct an analysis based on your circumstances. Investments with Trilogy are not bank deposits and are not government guaranteed.