What is property and how do I invest in it?

Looking at property
 

Property is a diverse asset class with many benefits. There are four main property investment options: direct investment, listed property shares, and property unit trust funds.

To help you understand the options, we've put together a handy table that can help you compare different kinds of property investments, so you can have an informed discussion with your financial adviser.

Type of investment What it is Advantages Disadvantages
Direct investment
  • To make a direct investment in property, you can buy residential, industrial, commercial, or retail property. For example, you could buy a residential house and rent it out.
  • Regular income from rent.
  • Growth on the capital paid for the property over the long-term.
  • An over-speculated property market can leave residential and business properties empty. This means that the property is resold at a price that's much higher than what it was bought for, so no new buyers can afford it.
  • You have to manage the property yourself or hire someone to manage it for you.
Listed property shares
  • Listed property shares can be bought on the stock market.
  • You can buy stocks in companies that only invest in property.
  • These properties could be in various sectors of the economy.
  • Properties are generally of higher quality than those that are available in other kinds of property investment.
  • Listed property shares are mostly exposed to the commercial property market, so the performance of your shares depends on how well the commercial property market is doing.
Property unit trust funds
  • This is the most common way for retail investors to invest in property.
  • Property unit trust funds are exposed to higher quality properties than those a direct investor would be exposed to.
  • In South Africa, these investments are usually managed by companies like Allan Gray, Coronation, or Investec.
  • You don't need to worry about managing the properties in which you have shares in yourself.
  • Since these are managed by reputable asset management companies, you can be assured that professional expertise is being applied to your investment.
  • Fees for property unit trust funds tend to be higher than the fees for other trust funds. This is because the cost of buying and managing a property is higher in a property unit trust fund.
How do I get started?

If you're keen to invest in property or just want to find out more, speak to a financial adviser about the different ways you can diversify your portfolio by investing in property. If property isn't for you, you might want to learn more about other asset classes like equities, bonds, and cash.

Before you make any decisions about your investments, speak to a financial adviser. They will be able to guide you in choosing the investments that are most suitable for your circumstances and personal financial planning goals.

This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life insurer, an authorised financial service provider and registered credit provider, NCR Reg No. NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product rules, terms and conditions apply.

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We give you the freedom to choose from a range of over 200 unit trust funds, through a single entry point, which means you get more investment opportunities. These funds are managed by leading local and international fund managers.

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