A falling property market is likely to put pressure on the unlisted trusts promoted by syndication firms, Armstrong Jones general manager property David Blight says.
As property values fall, people will want to exit their investments, but find it difficult because of the liquidity constraints.
"Some of the people who have invested in the syndicates will find a problem getting out of their investments," he said at the recent series of InvestmentLink mini-conferences.
He says liquidity is the greatest shortcoming with property owned directly.
While there was a secondary market for syndicated property units it was thin and prices were generally depressed.
Spicers research manager Aaron Hing says commercial property is moving into a downturn. The sector has dropped 0.6 per cent in June and it continues to fall in July.
"These are the first monthly falls in almost five years," he says.
On a longer term basis property has risen only 7 per cent before tax over the past 12 months, the lowest annual increase in four years.
He says the state of the property sector is a concern and he backs up Blight's comments about syndicated property.
"Even more concerning is the plight of those who have invested in commercial property through syndicates as we enter what looks like a tougher period for commercial property. One of the key weaknesses in these structures is the limited ability to sell these types of investments when the markets decline and there are limited buyers."
Investors in listed property trusts aren't immune to the downturn, however they have a ready market to sell into and they can be assured of a sensible price, he says.
Blight predicts the next 12 months will be difficult for the property sector.
A falling property market is likely to put pressure on the unlisted trusts promoted by syndication firms, Armstrong Jones general manager property David Blight says.