Real estate’s hot run may be over in the U.S., due to sub-prime lending woes and a fully priced commercial sector, but overseas, the sector sees a different picture, according to BusinessWeek.
The favorable outlook for real estate overseas could be due to regulatory and market changes. In the past few years, 20 countries have implemented the real estate investment trust structure allowing real estate companies that go public to avoid taxes as long as they pay out most of their earnings as dividends.
With access to capital markets, companies can build more, obtain prime properties, and increase earnings.
The outlook for global real estate makes it the best among 32 domestic and international asset classes, said Clark Winter, global chief strategist of Citigroup Global Wealth Management.
Areas like Asia and Latin America, where interest rates have remained low and stable, have attracted new developers, whereas before, they stayed away from these areas, Winter said.
The easiest way to get a piece of the global real estate boom is through specialty mutual funds. Sam Lieber, manager of Alpine International Real Estate Equity Fund, the oldest real estate equity fund, lists Brazil as one of his favorite areas. “Eighteen months ago, there were only three publicly traded Brazilian real estate companies,” he said. “Now there are 16 and more on the way.”
Other managers see Asia as the hot spot. Cohen & Steers International Realty Fund has 43% of its assets in Asia. Japanese real estate has the potential for a major recovery after 15 years of decline, said Joseph Harvey, chief investment officer at Cohen.
Exchange-traded funds also offer a way to take advantage of real estate funds. The new SPDR DJ Wilshire International Real Estate ETF carries a low 0.60% expense ratio. A few closed-end funds focus on the area, as well.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.