The Next Property Boom is Here - Free Financial Advice for Australians

...unfortunately it's not in your immediate neighbourhood!

We are all aware Australians have a love affair with property. As soon as we reduce that mortgage on our own home we're out buying another property and getting another whopping great mortgage on an investment property. High entry costs, low returns, and moderate capital growth are the flavour of the day. Whether it's our lack of knowledge or understanding, or merely an extension of our love affair with our own homes, we continue to invest in this risky area. Australians are generally overweight in property and overweight in residential property.

Without going over my views on residential property as an investment, why would you spend $500,000 plus stamp duty, agent fees, mortgage fees, legal fees etc etc to buy a half million dollar property in one suburb, in one street, in one location, in one country. Madness, simply herd madness. Why indeed when the world awaits. Somewhere in the world there is a property boom. My dislike for property is not for property as an asset class but property as the residential unit/home that so many Australians wish to hold and invest in. As I've often said, those that say to me "my home has been my best investment" are not investors, they are simply home owners. I find residential property too risky. It offers no diversification no flexibility and relies on too many factors outside the control of the investor.

Investors in Australian Listed Property Trusts (LPTs) have experienced a decade of amazing returns. The performance of LPTs over the past decade has been exceptional. The market, as tracked by the S&P/ASX 300 Property Index has produced an average annual return of 16.45% over that time and recently heightened corporate activity has pushed LPT share prices to dizzying heights - 34% last year. Suburban residential property has never achieved those results. The LPT market is now highly concentrated as many companies have merged and there are fears the market may finally be peaking.

The Rest of the World is now catching Up to Us

For those of us who like the property market and feel secure, it's now time to spread our wings and look globally. In the 1960s LPTs were only used by fund managers in Australia , the US and Japan to amass properties through this special purpose vehicle. In January this year the UK market joined the market with its first LPT, also referred to as Real Estate Investment Trusts (REITs). Germany and Italy are set to follow later this year making Western Europe the 'it' region for property outside opportunities in China and India . Now might be the right time to look at global property opportunities.

Time to go Global

The potential for higher returns and the benefits of greater diversification make international property a great place to invest over the next 10 years. In fact Boston-based real estate investment firm AEW (and remember they are a real estate firm) say there is a case now that international property is better than international shares.

Diversification

There is a very low correlation between the world's two largest listed property markets, which are of course the US and Australia, much lower than for their respective share markets, and this means the performance of one listed property market has little in common with the performance of the other. This means that by investing in both markets it may be possible to reduce the risk and increase the potential returns.

The second point is that there is a growing supply . The total value of the world's listed property markets is around $750 million and growing fast. And it's not only that demand is rising but supply is increasing as well. According to AEW the global stock of commercial properties is estimated to have a total value of more than $15 trillion, only 5% of which is in the form of listed securities, which means there's plenty of room for growth.

Australian companies are also poised to be at the forefront of this boom as we've had so much more experience in listed property trusts than many of our counterparts in Asia and Europe . Many Australian companies are exporting their expertise in this area internationally, BT, Mac Bank and Babcock and Brown to name a few.

The successful development of listed property markets in the US and Australia may be emulated in other Asian and European countries as rapidly ageing populations in these regions increase the popularity of investments that pay a steady income stream. As a result, the fastest growth from properties over the next decade might come from outside the traditional strong points of Australia and the US . By investing in global property we also get access to property types not available in Australia . For example, there are 6 major industry sectors in the Australian market, mostly represented by the retail sector, in the US there are 11 sectors. We think that some global property should be in all clients' portfolios.

Property boom - think outside the box - or the country!