Property investors should look at the single family residential (SFR) sector and focus more on defensive strategies within their property portfolios as the real estate market may be ready for correction, according to Man Global Private Markets (Man GPM).
The firm warned investors to ‘tread carefully’ in the current market cycle and suggested defensive strategies to help counterbalance potential property downturn.
According to Man GPM’s estimation, the US real estate market had been bullish for around eight years and had seen a significant price growth in the commercial real estate area.
“Although no-one knows the timing of the next downward correction in real estate, it seems likely to us that we are now past the halfway point at the very least,” Man GPM’s co-head of real assets, Mikko Syrjanen said.
Therefore, it was the right time to adopt a far more cautious and selective approach and build real estate allocations around long-term fundamentals, rather than short-term euphoria.
For this end, a US and Europe-based real asset focused investment manager which was bought by Man Group, Aalto Invest, had favoured the US SFR sector since 2012 to help offer investors long-term and diversified income with low price volatility relative to the wider market.
Man Group’s Asia Pacific managing director, Hersh Gandhi, stressed that while the SFR sector was new to many local institutional investors, it presented a growing and dynamic market for Australian investors.
“There are important differences that exist between offshore property markets and the Australian market – in terms of size, opportunities and valuations,” he said.
“Although most markets performed well leading up to the GFC, fortunes have diverged markedly since then.
“We think that this trend of institutionalisation has a lot further to run and the sector will become an even more attractive place to invest.”
