After posting terrible returns during the global credit crisis, real
estate may have finally turned the corner in 2010. Broad real estate
indexes like the *Vanguard REIT Index ETF* (NYSE:VNQ) saw gains of
nearly 20% or more in 2010, as investors snatched up bargains and
sought income. These strong gains have some analysts thinking that
many of the U.S. real estate bargains are long gone. But, investors
willing to break out their passports can find real estate deals
overseas.
5 Simple Ways To Invest In Real Estate
*Global Property Barons*Currently, the United States only
represents about 30% of the global real estate market. With more than
70% located overseas, there are certainly bargains to be had. Despite
this, the global securitized real estate market is relatively small,
compared to the broad international equity and fixed income markets.
The global real estate market is quickly growing, however. Since the
mid-90s, nearly 30 different countries, from Singapore to France, have
adopted the Real Estate Investment Trust (REIT) tax structure. (For
related reading, see _The Basics Of REIT Taxation_.) Prior to 1990,
only four nations had REITs. In addition, the global real estate
sector's market capitalization has expanded several fold, almost
reaching a trillion dollars today.
In light of the dour forecast issued by the IMF about the fate of
global real estate over the next eight years, now may be a
goodtime for investors to expand their real estate holdings globally,
as the sector still remains in bargain territory. Analysts estimate
that real estate stocks in Asia - particularly in China, Hong Kong,
Singapore, and Australia - should generate per-share cash flow growth
of around 8% in 2011. Europe should generate growth of around 3%.
Globally, average property values are beginning to increase and
non-bank lenders in Europe have boosted commercial real estate lending
by 24% throughout 2010. According to real estate consultancy group
Dealogic, firms and individuals have made 18 real estate acquisitions
in Japan this year, valued at $372 million. This is a dramatic
increase from the eight deals made in 2009.
Investors may also want to expand their REIT focus to include
international firms for another reason: A weakening dollar. According
to NAREIT, from 1990 to 2009, when the U.S. dollar was falling against
the Japanese yen, average total returns for investors were 12.1% per
year for investments in Asian REITs. However, 10.4% of that return was
from currency gains and just 1.7% was from the REITs themselves. The
industry group found similar results for Europe. As the dollar
continues to weaken long term, investors in international real estate
can prosper.
*Adding Exposure*The exchange traded fund boom has made this formerly
difficult to access asset class, quite easy to add a portfolio
allocation. *The* *SPDR Dow Jones Global Real Estate* (NYSE:RWO), for
example, combines both domestic and foreign real estate into one fund.
Investors looking to add a straight dose of international real estate
to their portfolios do have some choice in the sector.
The largest and most heavily traded in the sector is the *SPDR Dow
Jones International Real Estate* (NYSE:RWX). The fund follows 132
different REITs and Real Estate Operating Companies (REOCs) and
includes its largest weightings in Japan and Australia. The fund
yields 8.76%. *The iShares FTSE EPRA/NAREIT Dev REIT ex-US*
(NASDAQ:IFGL) can also be used to gain wide access.
Analysts estimate that even with China's red hot property market that
the highest-priced properties in the nation are still selling at a
fraction of the valuations for prime properties in Manhattan and other
major markets, like London. *The* *Guggenheim China Real Estate*
(NYSE:TAO) and the *iShares FTSE EPRA/NAREIT Dev Asia Index*
(NASDAQ:IFAS) offer targeted exposure to the region.**
*Bottom Line*After an impressive run throughout 2010, many of the U.S.
real estate bargains are long gone. However, the international real
estate market place is now renewing its march upwards. Investors with
long term timelines may want to add the low correlated asset class
through funds such as the *Cohen & Steers Global Realty Majors ETF*
(NYSE:GRI).
Source: Investopedia.Com
