Residential property underappreciated, according to Ironstone Group
The investment potential of residential property is not fully appreciated by advisers and investors despite being the largest single investment asset class in Australia, according to Ironstone Group.
Ironstone Group is comprised of Ironstone Funds Management and advisory firm Capital 360, which group chief executive Sean Preece said had identified a gap in the market for residential property investment and advisory support. He said the investment sector was underappreciated and Ironstone Funds Management offered what it believed to be one of the few unlisted residential property retail unit trusts in Australia, the Ironstone Residential Fund.
Preece said Ironstone Group steered clear of listed property because it was subject to what he called “unfair volatility”, as the investment class was affected by external factors despite solid underlying assets.
“Trying to make property liquid will always present problems,” said Preece, who asserted that property would always be illiquid and should be dealt with as such within an investment portfolio.
Preece said Ironstone Group had received a lot of interest recently from self-managed super fund (SMSF) trustees.
“There is an element of cautiousness, but also a willingness to get actively involved,” he said.
Fund director Jason Isherwood said the increased interest came off the back of changes to the borrowing within super rules, which led trustees to look more favourably on property as opposed to equities.
Preece said the SMSF sector was a promising area and Ironstone Group hoped to build on relationships with clients as well as advisers to gain traction in this area, as he saw Ironstone Group’s role as providing a property solution while advisers provide advice and facilitate the financing.
Isherwood agreed that continuing market volatility and economic uncertainty would continue to affect investor sentiment, but he saw Ironstone Group benefiting from a conservative approach as it focused on investing in areas where there was less volatility and supply was constrained.
Preece said Ironstone Group did not see the overall sentiment to property investing, which received a blow during the global financial crisis due to frozen funds, as being a challenge because Australians already had a very positive attitude towards residential property.
“The real challenge for us is increasing our profile and adding value,” said Preece, although he conceded that an environment of steadily increasing interest rates would obviously have an impact.
Preece said while interest rate rises were one of the key risks in the sector, Ironstone Group aimed to mitigate that risk through its conservative approach.
“It’s about buying assets that perform well in all markets,” said Preece, who compared Ironstone Group’s approach to that of investing in blue chip equities. He said while others would search out top returns, Ironstone Group’s focus was on more sustainable growth and quality assets.
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