If you are seeking financial planning help in Perth, you may or may not be aware of Australian unlisted commercial property as an investment. Recently, Shane Oliver, the Chief Economist and Head of Investment Strategy and Economics with our parent company, AMP Capital, addressed unlisted commercial property in his column, “Oliver’s Insights.” *
Mr Oliver mentioned that unlisted commercial property has been generating returns of 9.5-10.5% per annum over the last six years, since the end of the Global Financial Crisis (GFC). According to Mr Oliver, this is because yields have fallen due to investors in search of income bearing investments. *
According to Mr Oliver, when yields fall .25%, capital gains rise 4%. He goes on to explain that property prices rise relative to rents in what he calls a “falling yield environment.” This provides capital gains for those who invest in property. Mr Oliver goes on to note that Australian Real Estate Investment Trusts, or A-REITs, have produced capital gains of “around 13% PA over the last six years.” *
Mr Oliver does see one “drag” associated with commercial property: the current “ongoing softness in the Australian Economy.” He believes that economic growth will level off at 2.2.5% “well into” 2016 and that unemployment will remain at a level he calls “relatively high,” resulting in less demand for office space in markets outside of Melbourne and Sydney. *
Overall, Mr Oliver feels that current numbers point to unlisted commercial property providing “solid returns…in the years ahead.” While we can’t provide financial advice without an individual consult, we agree with Mr Oliver and feel that unlisted commercial property is worthy of consideration. *
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Even though, as we mentioned, we can’t provide financial advice on this blog, we will be happy to provide you with an obligation-free, individual consult in our office. Call Approved Financial Planners today: 08 6462 0888. *
*Shane Oliver, AMP Capital. Why unlisted commercial property remains an attractive investment destination. 05 November, 2015.