Retail investors looking to make an allocation to property should use a total return approach and not focus purely on yield, according to Australian Unity Investments (AUI) general manager property mortgages & capital markets Mark Pratt.
Often when individuals are considering investing in property through property funds they are looking purely at yield and comparing the return against cash rates, Pratt told InvestorDaily.
Property funds are usually offering a return between 1 per cent and 2 per cent higher than cash making the individual question whether an allocation would really be worth it, he explained.
"Investing in property now at the time of the cycle we're in is not just about income. It's about capital growth over the next five years which never happens in a term deposit," Pratt said.
"This is where some people have to change their approach in looking at property. It's not just about yield it's about total return and that probably involves some re-education about the sector," he added.
Pratt reiterated the people should be focusing on high quality properties with a constant income and a capital upside.
He admitted investors still had concerns with liquidity but with managed redemption procedures being put in place by managers, such as AUI, individuals should have a better level of comfort.
AUI head of property Martin Hession said in reality liquidity should not be a problem.
"Investors shouldn't have so much money in an illiquid product where if it does get frozen it becomes a problem for them because they should have their liquidity source held somewhere else," he explained.
"Advisers should be telling their clients to get their liquidity some other way."
