FEATURE REITs
REITS and Australian REIT Index is the equivalent for Australia, where the index only goes back to 2008, although REITs have existed for more than 40 years.
So it looks like US REITS have performed very well, certainly over the longer time frame. The Australian REITS were hit hard by the recession and their recovery has only been recent, so they show badly in comparison.
It is instructive – but beyond the scope of this article – to do similar comparisons for UK, German, Singapore and other REITS. These figures beg the question of why anyone would choose to buy property directly rather than through a fund.
There are four main reasons. First, people believe that they can beat the average. The believe that, by doing their research and buying well they can grab a bargain and so get much better growth. Second,
People believe that they’ll beat the average
the like having assets under their direct control. They worry (rightly of wrongly) about the stability and probity of many companies. Third, they often manage their own properties, so increasing the net rental yield. Fourth, many cling to concept of the hybrid property – part investment, part holiday home. They do this despite the fact that, as an investment strategy, this very seldom works. Are they right? Will they
continue to invest in this way even if they are wrong? Should you continue to serve this segment of the market? Should you, at the very least, if you are selling investment property, advise people to check out the investment options with their (regulated) financial advisers? Would you be better sourcing and selling property to REITS? We will be discussing these and other issues in a Round Table.
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Performance Comparison 1996 - 2013 /
Direct Buy in France
1996 - Jan - Index Level 2013 - Jan - Index Level
$100,000 invested in 1996 = in 2013
Rental Income @ 5% pa net
(the REIT figures include all income)
Total 40.50 114.50 $282,716 $85,000 $367,716 73.90 179.00 $242,219 $85,000 $327,219
Direct Buy in LA
US REIT Index
225.80 1280.00 $566,873 $0 $566,873
US Gross Returns 1995 - 2013
1600 1400 1200 1000 800 600 400
200 0
1995 1998 2002 2006 2010
Performance Comparison 2008 - 2013 /
Direct Buy in France
2008 - Jan - Index Level 2013 - Jan - Index Level
$100,000 invested in 1996 = in 2013
Rental Income @ 5% pa net
(the REIT figures include all income)
Total 104.80 114.50 $109,256 $25,000 $134,256 1718.00 1120.00 $65,192 $0 $65,192
Australian REIT Index
US REIT Index
1083.00 1280.00 $118,190 $0 $118,190
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