Survey: 45% say RE will outperform stock market over the next 3 years

Real Estate Weekly, Oct 16, 2002

Where do individuals expect to fine investment performance? A recent survey gives their perspective on real estate investments compared to the stock market. Forty-five percent; of survey participants say real estate will outperform the stock market in the next three years. Only 12% think real estate will do worse, while 28% say real estate investments and the stock market will perform the same. Fifteen percent do not know.

These are among the findings of a survey about real estate investments conducted in September by Opinion Research Corporation and sponsored by Behringer Harvard Funds, a commercial real estate investment company. Survey respondents were investors who had made at least one stock, bond or mutual fund purchase or sale outside of a retirement plan during the past two years. Approximately 400 investors were queried. The margin of error is /-5% at the 95% confidence level.

The survey also found that women were more optimistic than men about real estate: 51% of women said real estate would outperform the market in 3 years compared to 40% of men. Conversely, only 7% of women said real estate would do worse, compared to 15% of men.

Age makes a difference too. Younger groups were more optimistic than ages 55 and older. Only a little more than one-third of the older respondents said real estate would do better, compared to about half of the younger groups.

"These findings help explain the explosive growth in real estate investments over the past two years," noted Robert M. Behringer, president and CEO of Behringer Harvard Funds and a 25-year veteran of commercial real estate investing.

Survey respondents were asked to rank the importance of four real estate investment objectives. Capital appreciation potential was the clear winner, with 40% of respondents calling it the most important objective. Portfolio diversification came in second, with 31% ranking it most important. Bringing up the rear was capital preservation (15%) and current income (11%).

Despite their bias towards real estate performance compared to the stock market, less than one-third of the respondents expressed moderate to strong interest in investing in real estate now. However, attitudes changed by age group. Respondents aged 35 to 44 were most interested in making real estate investments, with 40% of them indicating a moderate to strong interest. Least interested were investors aged 55 to 64 and 65 and older, where only 18% and 16%, respectively, expressed moderate or better interest.

Among survey participants who were interested in real estate investments, 17% would consider putting one-quarter of their portfolio in real estate and another 17% would consider putting half into real estate.

Three quarters of survey participants use either a broker or financial planner for some or all of their investment advice.