Property can fill the gap in retirement income needs
Financial planners need to re-envision property investment as a three to five-year strategy that can provide consistent income streams for retirees, according to Mark Pratt, Australian Unity Investments general manager, property, mortgages and capital markets, and general manager, property, Cameron Dickman.
Dickman said that while the industry was seeing an increase in "the high net worth SMSF space" on the back of platform investments, "mum and dad investors" were yet to join the fray and needed education about the income stream well managed property investments could provide.
"We've got a demographic movement underway and they are income dependent and the biggest issue they're facing is the liability gap that they've got about their own income retirement needs," he said.
Dickman said many investors were burned during the Global Financial Crisis (GFC) but financial planners and retail investors who had plotted the liability issue of future income rather than target "one single hot flavour of the month income source" had been able to weather the GFC.
Pratt said "the institutional market has invested an absolute truckload of cash in the last 18 months in wholesale" but financial planners and retail investors needed to be re-educated about what to look for in commercial property and encouraged to consider the asset class "noting that some investors have had a negative experience".
He said investors had always looked to property investments for yield but the past four years had proven the reward/risk equation with any investment.
Pratt said while liquidity was the risk associated with property, consistent returns of 7 to 8 per cent fit with changing demographics.
"Most people in pension phase don't need their capital today, they need income to live off," Dickman added.
He said property investment tackled the inflation issue of cash investments, which is where many retail investors moved their funds after the GFC. Dickman said good financial planners could assess investors funding requirements; the other important aspect of property investments.
"This is one of the most obvious places for income streams to be generated so the natural fit is that there is a sequential movement back to property…Property plays that perfect spot in between where you're talking about good stable capital movements… with a strong income stream," he said.
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