The performance of Australian unlisted property is driving investor appetite, while advisers are looking to the asset class as an alternative yield-based product for their clients.
“We are expecting to see the fall of interest rates, which will start to move to term deposits so the expectation is that advisers [will] seek out alternatives for term deposits,” Charter Hall Direct Property chief executive Richard Stacker said yesterday.
“Property, providing 70 to 80 per cent of its total return from income, can do that and that is what is starting to drive things like our industrial fund and syndicate-type opportunities.”
Yesterday, the Reserve Bank of Australia slashed interest rates by 50 basis points to 3.75 per cent.
As self-managed superannuation funds (SMSF) remained the fastest-growing superannuation segment, it was no surprise 80 per cent of the funds in Charter Hall Direct products came from SMSFs, Stacker said.
“SMSFs are definitely where we’re seeing most of the mandates,” he said.
“There is a real push coming from that space to invest into this type of opportunity, compared to pre-global financial crisis (GFC) statistics.”
Confidence in the unlisted property sector was also growing through the demand for information from advisers and investors, he said.
“You need to spend time re-educating people on unlisted property, the various markets and where we see the opportunities – that is, actually taking time,” he said.
“We’re also seeing some of the open-ended funds that closed for investment off the back of the GFC start to reopen.”
The appetite for unlisted property was also growing from the investor side, according to a recent Charter Hall Direct Property survey of its investors.
“What we found was the majority of investors were focused on the potential total return, particularly the income side,” Stacker said, adding that liquidity was still a concern.
“Being unlisted is the one thing that holds them back slightly – how they’re going to exit.”
Over a 15-year period, the unlisted property space experienced very low volatility with a very good return, he said.
“SMSF investors are looking for sustainability of income and the one thing about property compared to other asset classes is that it does provide a very strong yield,” he said.
“In the last couple of years, in terms of the IPD index, we’ve seen the returns get back to that long-term average of just over 10 per cent.”
The survey also highlighted the tax-deferred component as important to investors.
