With Australian equities set to remain “lacklustre” throughout 2016, investors will need to look off-market to areas such as property to generate returns, says Australian Unity Investments.
Australian Unity Investments chief executive David Bryant said equity markets are expected to remain flat in 2016, requiring investors to seek alternate options such as unlisted property.
“With low commodity prices and less demand out of China it is fairly safe to assume that we’re not going to have an outstanding year for growth. Therefore, we can expect Australian equity returns to be muted in 2016.
“Investors are going to have to turn their minds to other sources of yield. This is especially pertinent given the outlook for interest rates,” he said.
Mr Bryant argued that un-listed property is a good option for investors in 2016.
“In this market, the best value is likely to be found in unlisted property, where revaluations haven’t always kept pace with what is on market.
“This is unlike the case with listed property trusts, the majority of which are trading to a premium – in some cases quite a significant premium of up to 20 per cent.
“As well, listed property tends to rally along with equities and other interest bearing investments on market, so off market is likely where the opportunities will be in 2016,” he said.
Mr Bryant added that while banks have been a good source of growth in the past, the sector is "unlikely" to deliver growth next year.
"Bad debts are likely to increase and this, along with the Australian Prudential Regulation Authority (APRA) monitoring the level of home loan lending, as well as business conditions not expected to improve markedly, means we are unlikely to see a lot of growth coming through in bank shares," he said.