RF Group Acquires Schroders’ 50.1% Equity Interest in Schroders RF Limited
The RF Group is pleased to announce that it has acquired Schroders’ 50.1% equity interest in Schroders RF Limited, taking...
Australian property has been a solid bedrock through the ups and downs of the economic cycles for many decades. The phrase “safe as houses” exists for a good reason.
Residential property is one of life’s essentials – everyone needs a place to call home. For this reason, housing costs are a significant contributor to Australia’s consumer price index (CPI) (making up 22% of the CPI basket in the December quarter of 2023).
The charts below show the phenomenal increase in the costs of new dwellings and rents. While sales of existing dwellings are not captured in CPI data, dramatic increases in the cost of raw materials and supply-chain difficulties are actually a silver lining for residential property owners. It increases the value of and the demand for existing dwellings. Ownership of residential property provides a real protection against inflation.
Commercial and industrial property also have inflation-busting features. Many commercial leases have rental escalators tied to inflation or rent reviews at specific times. These all give real estate investors the opportunity to ensure their income generates a return above inflation.
Certain subsectors of specialty property are also characterized by very low levels of supply and substantial growth in demand. Student accommodation, data centres and industrial warehouses spring to mind as three such subsectors. Supply / demand imbalances make them an ideal inflation hedge.
Choose your assets wisely
However, investors can be caught unawares. By way of example, the Covid-19 pandemic has accelerated a number of trends, most notably working from home. This structural change has substantially weakened the pricing power for owners of office space and their ability to pass on inflationary increases to tenants is becoming severely limited. Many of the Australian listed real estate investment trusts have fallen victim to this with substantial writedowns on their office portfolios.
Regulatory changes (threatened and actual) such as increased taxes on short-term rental properties such as Air BnBs and recent talk of winding back negative gearing, can also make direct property investment fraught with uncertainty.
An alternative way?
Some investors are eschewing direct property investment entirely and capturing attractive yields through private real estate debt investing. Whether through real estate debt funds or individual mortgage loan syndicates, income-focused investors are capturing the benefits of interest rates being at or near their peak and without the administrative burden of managing property directly or the volatility of listed assets.
Corval Avenue Limited ACN 089 265 270 AFSL 238546 (Corval Avenue) is the responsible entity of the Corval Avenue Select Credit Fund ARSN 090 994 326
This document does not contain and should not be taken as containing any financial product advice or financial product recommendations and has been prepared without considering your objectives, financial situation or needs. Before making any decision relating to a Corval Avenue fund, you should obtain and read a copy of the product disclosure statement and target market determination, or other relevant disclosure document for that fund, and consider the appropriateness of the fund to your objectives, financial situation and needs.
Past performance is not a reliable indicator of future performance.
Corval Avenue does not guarantee the accuracy, reliability, or completeness of the information in this document. To the fullest extent permitted by law, Corval Avenue, its group companies, and their directors, officers, employees, consultants, and agents disclaim all liability for any direct or indirect loss or damage arising from the use of this document. All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed.
