Australian property investors who can ride out the current downturn are poised to reap at least 9% per annum return on their investments over the next five years according to Residex.
John Edwards, CEO, Residex said that while housing won't provide capital growth like we've seen in the past two decades, it's still offering a better return compared to shares.
"2008 has been a year that has proved to all that housing is a lower risk asset than any other," Edwards said. "Our models are generally predicting housing prices will just keep up with inflation or marginally do a little worse, however, in the current economic climate, this is a good outcome. I'd be surprised if shares achieved the same outcome over the same period, simply because earnings are going to be depressed and therefore dividends."
Edwards noted that the share markets had lost about 40%, and super funds suffered a reduction of something in the order of 40%. This is in contrast with real estate which saw a modest rate of growth of 2.97% and a drop of 2% in real terms.
"While industry and share markets can expect lower cash flows, our housing markets will continue to provide increasing cash flows (rents) which will reduce the risks even further in an environment where interest rates are reducing," said Edwards.
Based on his analysis, Edwards said that only Canberra is yet to bottom out while Perth still has adjustments to come but will avoid dramatic falls in value.
"Brisbane has a less-exposed economy [and] will provide higher rates of return, while Melbourne and Adelaide may be impacted by the car and heavy manufacturing industries - which could see increased job losses if the US parent companies fail to support these industries," he said.
Edwards said he remains in favour of investing in NSW, and in particular Sydney, which has experienced a prolonged period of adjustment.
"There are bargain buys in this market and it's subject to a chronic supply issue. It will provide a total return which will be attractive in the longer term," he said.
