MENU

Here’s why property could be a long term opportunity for investors

The sentiment around investing in property has deteriorated over the last couple of years and for good reason. Australian property prices have grown at rates far above long term averages leading to concerns that we might be in a property bubble.

The fact that a lot of properties are owned by highly leveraged investors at a time when interest rates are at all time lows but likely to increase sooner rather than later, is also a cause for concern.

This is compounded by the fact that property is currently providing investors with lower yields (consistent with lower interest rates and the recent run up in prices).

Despite that, I think there is one factor that could create an opportunity for long term investors in property: technology.

At a time when technology is disrupting many established business models (I’m looking at you Amazon.com, Inc. (NASDAQ: AMZN) and JB Hi-Fi Limited (ASX: JBH)), I think property will prove to be fairly resistant to disruption.

Of course, there will be technologies such as the Nest smart home device created by Google (Alphabet Inc Class C (NASDAQ: GOOG)) that will enhance properties but it won’t disrupt the investment thesis for properties. 

That’s why I think investors who are more concerned about wealth preservation as opposed to growth will continue to look for property investments to anchor their portfolios.

Of course, not all properties will do well and only investments in the best quality assets will do well over the long run.

Here are a few ways of identifying potentially good properties:

High moat assets

Companies such as Auckland International Airport Limited (ASX: AIA) are virtual monopolies and have no close competitors which give them a moat. 

Discounted assets

REITs such as Vicinity Centres Re Ltd (ASX: VCX) and Investa Office Fund (ASX: IOF) have recently been trading at a discount to their net asset value and so there could be an opportunity there. 

Index funds

Index funds would be my preferred way of capturing the overall market performance. I particularly like Vanguard’s property ETF V300APROP/ETF (ASX:VAP) for its low fees. 

If you want to learn more about disruptive technologies, click here to find out the technology that this Japanese billionaire is investing $100 billion into.

Japanese Billionaire’s Prediction Will Give You Goosebumps

When a veritable investing and entrepreneurial genius speaks, it pays to listen.

In fact, he's now preparing a $100B "war chest" to invest entirely in this "terrifying" new technology, which could spell huge profits for investors.

Click here to learn about this technology and how you can profit!

Motley Fool contributor Kevin Gandiya owns shares of Alphabet (C shares).

You can follow Kevin on Twitter @KevinGandiya.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares) and Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.