Hope For Prospects In The Global Property Securities


With the current drastic changes in the world economies, a lot of fund companies, fund distributors, and financial planning firms remain quite hopeful about prospects rather than predicting a fall in the global property securities (GPSs) asset class. This class includes real estate investment trusts (REITs), property stocks, and other listed property investments throughout the globe. The global real estate market fundamentals are still healthy.

Rising Demand on Property Securities

As the population continues to grow, many people are joining the business world. For this reason, the demand for office space within the major financial centers has remained high. That has resulted in rental income value growing steadily.

What’s more, the investor demand is also held in position by long-running demographic factors and the main attraction of property, its yield has remained intact. Certainly, property investments demand throughout the world has also been increasing over the recent few decades as the global aging populations focus on steady and high-yielding investment vehicles.

Over the past few decades, the people who have invested in the industry have enjoyed returns of over 20 percent averagely per year. For instance, European property equities funds have remained to be one of the best performers within the property funds category. They have offered returns over 14.4 percent while Asian and global property funds are over 3.60 and 6.70 percent respectively for the years.

With the recent changes and mishaps in the world economy, the prices have declined significantly. However, in some cases, people have witnessed distinctly appealing buying opportunity. The problem is that not everyone is assertive or 100 percent confident with the sector.

Current Returns from REITs

Returns from REITs aren’t as charming as they used to be some years ago, particularly in the current scenario of rising interest rates. The interest rates in many parts of the world have been steadily rising and that has to make REITs less alluring. For example, about three decades ago in the United States REITs, the average dividend had often been at least 7 percent. However, currently the same ranges from 4 to 5 percent.

Fortunately, the growing property securitization has come as an advantage. That’s because REITs are now becoming an emerging asset class and if you’re a long-term investor, then it will be hard for you to ignore it. REITs and PSs still have an important role to play in the portfolios of some investors, particularly those looking for regular income.

The GPSs together with hedge funds and commodities are usually touted as reliable portfolio diversifiers because of their well-known correlation with global equities. But the recent market decline appears to suggest otherwise.

Volatility in the Markets

In markets like the United Kingdom (UK) where professional property share investors are just a small proportion of investors in the property companies, short-term volatility could be greater. Also, in markets such as Australia and the United States where dedicated REIT investment funds account for up to half of shareholders, volatility is significantly lower.

What To Expect

With so many long-term investors getting into the property securities and REIT sector, that could help in creating a calming effect on volatility on the property asset class. In Europe, we hope to witness an upward growth in the property markets. Most of the most important markets are likely to get active as the economy continues to grow.

On the other hand, we can expect the Asian property market to be one of the fastest-growing regions on the globe. With that in mind, as an investor who’s interested in investing in property funds as part of a diversified portfolio, you should keep your exposure to less than 10 percent. That’s because they might be far more volatile than other funds investing in already developed regions.

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