Are REITs rather moving with the share or the property market?

Hi Dave.

REITs are moving more in line with interest rate expectations than anything else. The share market does tend to move along these lines also, but REITs have a more amplified exposure to it because of the debt they carry.

They definitely don’t move in line with residential property, it’s an entirely different market with its own set of supply/demand forces at play.

If someone doesn’t own any residential property, there’s little specific benefit they’d get by owning REITs. It’s not a replacement or replica of property ownership, other than the fact that there’s building ownership involved.

REITs suit an investor who wants more of their money parked in bricks and mortar I suppose. There’s an argument that commercial property is underrepresented in the stock market indexes compared to the industry’s asset value as a whole.

While acknowledging that REITs have the same risks as other shares in terms of management risk, even if the underlying assets won’t go to zero like a business can. They’ll typically provide a higher yield than other assets like shares, which may suit the investor, but the capital growth will typically be less. Of course, all sorts can happen over various timeframes but that’s the general rule.

That’s my 2c anyway!
Dave