It is important to first understand the reason for the market's condition then the important of diversification.
The global credit crisis coupled with share market volatility have hit trusts hard. Despite this many property markets are reporting growth. For example, the Australian retail unlisted property sector reports a 14 % increase for the last year. Listed properties have been undermined by a volatile property market. The last 4 months have seen a general reversal in trading sentiment with markets no longer performing with regard to valuation. Dugald Higgins the associate director of Property Investment Research does point out that unlisted property investment may provide some relief. He says, "… unlisted investments are likely to perform much more in line with the underlying property fundamentals." The reason why more investors are looking to the unlisted property market is the growth of open-ended unlisted trusts.
Shifts like this are inevitable. In 2006, the big investment craze was to "buy to let." For a period of 5 years, developers and investors were buying up properties in order to turn around and let them. All this was despite the constant warning from industry insiders. It is entirely possible that in some areas, house prices could stay the same for the next 5 years. This illustrates the ugly truth about property investment. It is always assumed that property value will continue to rise due to increased demand and appreciation. The recent credit crisis has turned changed that. House prices in the UK are expected to fall by as much as 15% in the next three years. The US, which seems to have the worst market conditions at the moment, could see declines by as much as 19%.
While some would recommend simply selling the property prior to the dip, analysts recommend that investors diversify their property portfolio. Concentrating solely on residential property for example could prove costly. Instead diversifying property investments will protect against anything the market has to offer.
