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By Per Amundsen, Head of Research, Thinktank
For many investors, property investment means one thing; residential housing. There’s no shortage of books, seminars, lectures, to say nothing of the legion of real estate agents, urging investors to buy an investment property. Sure, the yield may be low but rising prices and the opportunity to negatively gear more than compensate, they reason.
Well, that was until about mid-2017 when real estate prices, especially in the two major capital cities – Melbourne and Sydney – started to fall. Although the jury is still out on whether prices have bottomed out, the fact is the market shake-out demonstrated that those “experts” who argued this bull market was different – that there were different dynamics are work this time – were wrong, if not reckless.
The simple fact is that while housing prices have appreciated over the long-term, there are times when they stand still or even fall – as in the past two years.
What investors need to be mindful of is that there are other property options that can offer them higher yields and steady capital gain, also over time. With the benefit of hindsight, many of those investors who poured into the housing market in 2015 and 2016 with their ears pinned back would have been better advised to look at diversification into a commercial property.