The key difference between direct and indirect property investment is how investors gain exposure to property assets.

Direct property investment

Direct property investment involves owning physical real estate assets, either individually or through a fund. You own the asset (or a share of it) and are exposed to how that specific property performs.

Key characteristics:

• Investors own or have a direct interest in physical property (e.g. office buildings, retail centres, industrial assets)
• Returns come from rental income and capital growth
• Typically less liquid, with longer investment timeframes
• Can often require higher minimum investment amounts
• Often appeals to those comfortable with lower liquidity and asset-specific risk

Indirect property investment

Indirect property investment provides exposure to property without owning the physical assets directly.

Key characteristics:

• Investors buy financial securities or units in a fund that invests in property
• Examples include AREITs (Australian Real Estate Investment Trusts), GREITs (Global Real Estate Investment Trusts) unlisted property funds,  property securities funds and mutual funds
• Returns come from distributions
• Can provide access to liquidity, traditionally quicker than buying and selling property directly
• Lower minimum investment amounts and broader diversification

Summary of differences

Ownership:

• Direct = physical property
• Indirect = Owning an investment that owns buildings, or invests in listed companies that own buildings

Liquidity:

• Direct = low
• Indirect = high

Access:

• Direct = often wholesale or higher minimums
• Indirect = widely accessible to retail investors