Real Estate: the REIT way to go?
Charts on investing in real estate
Real estate investment has always been an attractive option for individuals looking to diversify their portfolios and generate consistent returns. Today we’re sharing some charts on investing in real estate.
Property prices are on the rise
Over the last 10 years, there has been a steady increase in property prices across many regions. Below we’ve charted the change in the real estate index in the UK, US, World, Emerging Markets, and Advanced Economies.Â
The index in the United Kingdom is lower than the global average, whilst the United States is substantially higher. Factors such as population growth, urbanisation, and limited housing supply have contributed to the general upward trend in property prices.Â
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How lucrative is investing in real estate?
Per an analysis by Personal Finance Club, purchasing a property as a primary home to live in is ultimately a money-losing endeavour. However, the return on investing in real estate for rental purposes can be on par with the returns from the S&P 500. Of course, it is important to take into account factors such as market demand, location, and property price, that will ultimately affect rental yields.
The REIT way to goÂ
Evidently, investing in real estate is a profitable endeavour. And several publicly-traded companies are investing in real estate on a large scale, allowing retail investors to get in on the action: Enter REITs.
Real estate investment trusts, or REITs, are companies that purchase income-producing real estate across a range of property sectors. Let’s take a look at some of the largest REITs worldwide, and the share price history of the top three.Â
In October 2022, the share prices of Prologis, American Tower, and Equinix dropped due to rising interest rates. Higher interest rates hit REITs in two ways: higher yields led bonds to be a more attractive option for investors, whilst higher borrowing costs reduced REITs’ margins. However, REITs can be a good option for investors looking to diversify their portfolios and increase dividend yields.Â
See you on Friday for a deepdive on Cadence!
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Very interesting but it would be more useful to see the first chart going back twenty years not ten. And maybe an even longer term chart too.
I find it strange that buying a home to live in is considered "ultimately a money-losing endeavour." Every person has to live somewhere, so if you factor in the cost of paying rent if they don't buy a home, then I can't imagine this being a losing proposition.
My own home would be a typical example I believe. Let's use simple numbers: Initial cost $200,000; Current value: $400,000 - over a 24 year time span. Mortgage, Insurance and property tax costs are roughly equal to renting. Cost of maintenance: about $50,000 (so far) So it would seem like I've gained a fair amount of value (not factoring in inflation).