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What’s Supporting Real Estate Prices?

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Access to money is one of the key reasons for success in commercial real estate, especially here in the U.S. where REITs are everywhere. But with dividend yields near historic lows it begs the question: What is supporting these lofty prices? Even skyscrapers don’t grow forever. Now in Malaysia, where REITs seemed ready for prime time, things aren’t looking so good. Shefali Anand writes:

Until recently, Malaysia seemed to be on track toward building a successful market for real-estate investment trusts. Its market grew to a capitalization of around $10 billion, and included Kuala Lumpur’s Petronas Towers, the world’s tallest twin structures, and the first Islamic REIT.

But the mood has shifted, in a reversal that illustrates how REITs aren’t turning out to be a silver bullet for emerging markets trying to route public capital into real estate. New REIT listings in Malaysia have all but stopped over the past two years, and profits have fallen or been flat.

The market has yet to attract the hoped-for interest from international investors partly because the Malaysian REITs are much smaller, less liquid, and more uncertain than REITs in developed neighbors like Singapore and Hong Kong.

“They haven’t benefited from the wave of international capital which has been driving Hong Kong and Singapore REIT markets,” said  Corrine Ng, portfolio manager of an Asian REIT fund at Australia’s APN Property Group Ltd . , which manages $2 billion. Ms. Ng’s fund has less than 2% of its portfolio in REITs issued by developing countries.

Read more here.

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.