Residential property values have fallen around ten per cent on average in the capital cities. Losses have been less in the Central West. However properties appear unlikely to provide much capital gain over the next couple of years while interest rates remain high.

With growth unlikely, rental income will be the main source of returns. Typical net rents are low, perhaps three per cent on the value after property costs. Rents have not risen as much as prices in recent years. Bank deposits now pay more income than most residential properties.

Commercial property investments look more appealing at present. They pay much higher income, typically around double the rate of residential property. Rents are usually indexed to inflation, increasing annually, automatically.

If rents rise each year, values are also likely to rise, or at least not fall when interest rates increase. Net rental income from shops, offices and warehouses is well above bank interest of around four per cent.

One difficulty with commercial property is its size, requiring a big cash outlay. Property funds are available for investors who don’t have enough capital to buy their own property. Investments can start from as little as $20,000. Each fund usually owns several properties.

What effect has Covid had on demand for office space? Covid brought great fear that a large proportion of offices would be empty due to people working from home and never returning to the office. Companies would cut back their requirements.

That hasn’t happened. While many office workers work from home some days, nearly all now spend some time in the office each week. Many management teams want their staff back in the office much of the time. There has been no significant fall in demand for office space.

Covid was also going to make shopping centres empty because everyone would learn to shop online, eliminating the need to visit them. That didn’t happen either.

Shopping centres are now just as busy as they were before Covid. They offer touch, feel and try shopping, as well as window shopping, coffee with friends and entertainment.

There are other types of commercial property – factories, warehouses, hotels, and healthcare properties to name a few. All provide relatively high income and have good prospects of capital growth over the long term.

For example, the fund that owns the new private hospital building in Orange has just re-opened to raise capital to buy several more medical services properties. Rental income is near six per cent and it increases each year with inflation so capital growth should also be sound.