Australia is one of the most property-obsessed nations in the world. There is a huge chunk of the nation that believes property never goes down and that it's the best asset class.
The last few months have shown that property doesn't always go up and it could get even worse in the upcoming months and years.
It's almost impossible to find a cashflow positive property in a capital city unless you have enough cash to buy it outright. Paying money to own an asset ongoing through negative gearing seems like a bad idea.
But property doesn't have to be all doom and gloom. There are a few property investments on the ASX that could provide long-term capital growth and good income. Here are my favourite three:
National Storage REIT (ASX: NSR)
National Storage is Australia and New Zealand's largest self-storage provider. The growth in property prices has meant that having a room in your house just for storing items could cost many, many thousands of dollars. We also seem to have an increasing amount of 'stuff'. Both of these factors have led to a boom for storage providers.
Being the biggest provider means National Storage has the best economies of scale and can make more profit on the price it charges compared to competitors.
It's currently trading with a trailing distribution yield of 5.83%.
Arena REIT No 1 (ASX: ARF)
Australia's growing population and reassuring economic growth has led to a baby boom. Most of those babies will end up going through kinder and childcare, which helps the childcare operators and the landlords of the childcare buildings.
Arena is one of the largest childcare landlords in the country and is experiencing solid growth for a REIT year after year.
Right now, it has a trailing distribution yield of 5.84%.
Rural Funds is Australia's only purely-agricultural REIT. It has a variety of farm types including cattle, poultry, almonds, macadamias, vineyards and cotton.
Farmland has been a useful asset for an extremely long time and I'm sure it will be good for many decades to come.
It's currently trading with a trailing distribution yield of 4.66%.
Foolish takeaway
I believe all three of these REITs will generate much stronger returns than residential property over the next five years. Rising interest rates are a worry, but that will affect residential property prices as well.
