Great opportunities on offer despite significant challenges in 2018, finds risk analysis expert

By Tim Neary 04 May 2018 | 1 minute read

Australia’s top 3 major asset classes, one of which is residential property, are projected to achieve the lowest returns in a quarter of a century, but great opportunities still exist for those who know where to find them, according to one risk research company.

The latest analysis by RiskWise Property Research has found that 2018 is projected to be significantly challenging for investors across the asset classes of shares, government bond yields and residential property.

CEO Doron Peleg said that typically in these asset classes investors can expect to see returns in the range of 5 per cent.

“However, in 2018, under a realistic scenario investors could achieve only 3.4 per cent growth for houses or ASX200 shares, with bonds coming in at just below the 2 per cent mark.

“Previously the lowest was in 2015 with only 4.76 per cent and this was because we had a very low interest rate environment and volatility in the financial markets.”

But Mr Peleg said all was not doom and gloom as there are still sound property investment opportunities to be had around the country.

“The 2018 property market greatly varied across the entire country and some areas do present investment opportunities and carry low risk,” he said.

“Therefore, it seems investors looking for long-term returns to minimise the risks should take a risk-based approach to property.”

Food bowl

Propertyology market analyst, Simon Pressley, says the fundamentals of Cairns today are as good as any.

“Demand is certainly strong in the area,” Mr Pressley told Smart Property Investment.

“Cairns sees a lot of interest from Asian businesses, especially in the agricultural sector, as it is located close to Asia. Australia’s agricultural products are, worldwide, they say among the best, and we hear that term, ‘Australia is Asia’s food bowl’.

“It doesn’t mean investors should be looking to buy farms, that’s a different thing altogether to investing in property, but it’s just thinking which parts of Australia have what agricultural products and where are jobs created with that.”

Equally, founder and managing director of Probity Investments, Jeremy Foster, said smart property investors should look to capitalise on the rising SunshineSunshine, NSW Sunshine, VIC Coast market.

He said this is because of its population and economic growth.

Steady flow

Mr Foster pointed to comments made by demographer Bernard Salt, who said “long-gone” is the sense of the Sunshine Coast as an enclave of older retired Australians and New Zealanders.

“The Sunshine Coast has grown from an economic base of tourism and construction to entrepreneurial, small-to-medium enterprises in health, technology, professional services, building and retail sectors to attract a steady flow of young people into the region.”

And, Right Property Group director, Victor Kumar, said the area in and around 60 minutes north of the Brisbane CBD is currently “primed” for growth.

He said there are three main infrastructure drivers influencing the region.

The first is the university in Petrie.

“This is the old paper mill site. The government has taken over a large tract of land, and they are building the largest university in Queensland there.

"And linked to that which is about 30 minutes away is the CabooltureCaboolture, QLD Caboolture, QLD Base Hospital, which they are turning into a teaching hospital.”

Mr Kumar says the third is a further 400 acres of land near to the Petrie university that the government has declared as a priority development area.

Mr Peleg called the 2018 situation “extremely unusual”, due to a “perfect storm” of volatility in financial markets, ultra-low interest rates, moderate projected dwellings growth, poor growth in the mining states and the impact of the royal commission.

RELATED TERMS

Offer

An offer refers to a conditional proposal made by a buyer or seller during a transaction for an asset or property, which becomes legally binding when accepted by both parties.

Risk

Risk is defined as the possibility of an investment having a different outcome from its expected gains or returns.

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Great opportunities on offer despite significant challenges in 2018, finds risk analysis expert
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