Demand for product and greater enquiries from financial advisers have fuelled interest in the unlisted property market.
"There's definitely been a pickup in interest in the last six months due to the volatility in the equities market and term deposits dropping," Centuria Capital Property Funds chief executive Jason Huljich told InvestorDaily.
"Once term deposit [returns] drop below 5 per cent, a lot of investors who need their yield to live on will have to look at other asset classes and at the moment property is looking pretty good," he said.
Extended due diligence was being undertaken by both financial planning groups and investors, resulting in further examination into the manager, track records, governance and staff, he added.
In addition, there were now only five active unlisted property retail players in the market since 2007, Huljich said.
"When planning groups come into this space, what we're seeing is that they really want to do it with someone that's been around for a long time and has got scale so they are being picky with who they're investing with," he said.
High quality properties without previous risks were now included in funds, regaining some confidence from advisers to consider unlisted property.
"There's definitely a lot of demand from planning groups and direct high net worth investors. They want good yield and potential for capital growth," he said.
Advisers were more confident about tenant, valuation and debt risks. In addition, a growing request for a more defined exit strategy with detail on when and why an asset would be sold was occurring, Huljich said.
"Instead of being locked up in [an investment] forever, they want to know that you've thought about the different strategies for getting out of it and when you think you will get out of it," he said.
"They want to know all that detail."
Charter Hall Direct Property chief executive Richard Stacker said there is a lot more interest in unlisted property compared to three years ago, however it was still a difficult market to raise capital in.
"Those investors that have looked at it from a cycle perspective have been the early adopters who were back in the market for two years and now the next round that we're starting to see come through are looking at it from a yield side and where we're up to in the cycle," Stacker said.
Advisers continued to look for opportunities uncorrelated to other investment classes such as equities, he said.
"The correlation between direct property and equities is about 0.5 and for listed property it's about 0.7, which is highly correlated," he said.
"The yield that property is producing at this point in the current cycle is attractive, compared to other yield-type products advisers and investors were considering."
In March this year, ASIC called for improved unlisted property disclosure requirements by 1 November 2012.
