Melbourne research house Managed Investment Assessments (MIA) has predicted investors will experience a sharp downturn in the market by 2010.
Overall the market has experienced 14 years of growth, MIA director Anton Lawrence said. This is with the exception of the dot.com crash that saw office property prices plunge in suburbs like North Sydney, North Ryde in Sydney and parts of Melbourne.
"A higher interest rate environment, any decline in demand for direct property or a change in global investment flows will result in falling property values that will have a negative impact on the listed property trust market and, by extension, the property securities fund sector," Lawrence said.
Property Investment Research director Mark Wist said yield compression in real estate markets had placed increased reliance on further capital growth and continued rental escalation to achieve returns equal to the level of risk associated with fund acquisitions of both securitised and direct property assets.
"While the weight of funds seeking a home in securitised property has enhanced competition for assets and contributed to this yield compression . . . it is not certain that this trend is sustainable over the medium to long term," Wist said.
"There may be some compression left yet, however based on property investment fundamentals, it is quite possible, in fact likely, that some subsequent reversal will undo some of the capital value gains made to this point. It is at that time that some questionable acquisitions will no longer be masked by the current benign environment."
