Investing in direct property brings stability to a portfolio, minimising the risk of knee-jerk reactions by investors during negative market cycles, according to researcher Atchison Consultants.
"Direct property's low volatility is an extremely valuable characteristic. When portfolio risk is reduced, investors can better focus on longer-term objectives as they are less likely to respond with inappropriate reflex investment decisions", Atchison Consultants managing director Ken Atchison said.
A study done by Atchison Consultants on behalf of the Australian Direct Property Investment Association (ADPIA) showed the investment returns and volatility of property over 20 years to June 2005 was favourable compared with other asset classes.
The research showed direct property delivered a return of 9.5 per cent compared with overseas shares, which returned about 7 per cent. Although Australian shares delivered a return of about 13 per cent during the same period, Atchison said this return also came with a higher level of volatility compared with direct property.
"Returns from investing in direct property are not only strong but stable with lower levels of volatility compared with other asset classes," Atchison said.
ADPIA president Owen Lennie said investors should up their exposure to property given the results of this survey.
"The report findings demonstrate that investors with property allocations of 5 to 10 per cent should be increasing these allocations to at least 20 per cent in balanced, growth and high growth portfolios," Lennie said.
