Why Invest in Direct Property?
Cromwell believes that direct property is an essential part of any balanced investment portfolio. It is the only major asset class to historically move in different cycles to the other main asset classes of shares and bonds. The following key benefits of investing in direct property are drawn from the Australian Direct Property Investment Association's "ADPIA Investment Report 2006", which was compiled in association with Atchison Consultants.1
Income Returns
- Highest level of income – over the 10 years to June 2006 direct property provided the highest levels of income returns of any asset class, delivering 7.2% pa.
- Lowest income volatility – over the 10 years to June 2006 direct property had the lowest volatility of income returns of any asset class.
HIGHEST LEVEL OF INCOME AND LOWEST INCOME VOLATILITY
Asset class income returns and volatility of income returns measured after fees and costs with nil tax (10 year analysis to 30 June 2006). Source: ADPIA
Total & Risk Adjusted Returns
- Strong total returns – over the 10 years to June 2006 direct property delivered a solid 10.5% pa.
- Best risk adjusted returns – over the 10 years to June 2006 direct property produced the highest level of risk adjusted returns (Sharpe ratio) as measured by volatility, of any asset class.
STRONG TOTAL RETURNS
Asset Class Returns measured after fees and costs with nil tax (10 year analysis to 30 June 2006). Source: ADPIA
BEST RISK ADJUSTED RETURNS
Sharpe Ratio measured after fees and costs with nil tax (10 year analysis to 30 June 2006). Source: ADPIA
Potential for Gearing
Secure income streams from sound tenants with leases structured for growth in rental income provides a sound basis for gearing of property. Geared direct property produced an inferred return of 15.6%pa. for the 10 years to 30 June 2005 – the highest return of all asset classes.
SOUND BASIS FOR GEARING
Geared Asset Class Returns measured after fees and costs with nil tax (10 year analysis to 30 June 2006). Source: ADPIA
Stable Returns Profile – with low correlation to other asset classes
Over the 10 years to June 2006 all direct property classes have produced positive returns in every year – with very low correlation to other asset classes, making direct property an important asset in portfolio construction.
STABLE RETURNS PROFILE
Worst perormances over any annual period measured quarterly after fees and costs (10 year analysis to 30 June 2006). Source: ADPIA
1. Past performance is not an indication of future performance.