À̹ÌÁö È®´ë Korean REIT stocks draw attention with 7% gain this year [Image source: Gettyimagesbank]
Real estate investment trust (REIT) stocks are attracting investors amid growing awareness that interest rate hikes are nearing their peak. In addition, these stocks looks better than those on the broader KOSPI this year, given their potential dividend payments.
REITs allow investors to pool their money to purchase, manage and sell real estates and REIT stocks are publicly traded on the stock market, while offering the potential for cash dividends.
According to the Korea Exchange on Thursday, the KRX REIT Infrastructure Index, which includes listed REIT and infrastructure stocks, gained 7.7 percent to 1,528 as of Jan. 25 from 1,419 at the end of last year. The growth is slightly lower than the KOSPI increase of 8.5 percent during the same period, but the calculation excludes the dividend yield from listed REIT stocks, which is usually over 4-6 percent.
Yeouido analysts say that the recent rise in REIT stocks was driven by the decline in market interest rates and a stabilization of sentiment in the local bond market after the Legoland crisis.
However, there is a factor that makes investors reluctant to invest in REITs, which is a potential hard landing in the local real estate market.
Some say that commercial real estate values may decline further in the second half of the year, but a sharp decline will not happen given the nature of REITs that move ahead of the real market.
¡°If you look at the U.S. market, which has a long history of REITs, their rebound during the financial crisis preceded the commercial real estate market by three to four quarters. Even if the price adjustment in the real market in the second half of the year is confirmed by numbers, it is unlikely to see a negative impact on the REIT market,¡± said Bae Sang-young, an analyst at Daishin Securities Co.
He advised investors to approach REIT stocks from a dividend perspective rather than capital gains at this point. Even if interest rates are falling, they are still at an absolutely high level, and thus it is difficult to expect a meaningful rise in REIT stocks in the near future, he said, adding that investors should focus more on dividend investment based on rent rises rather than the increase in the value of underlying assets.
To ensure both dividend yield and stability, rent hikes should be an important criterion for selecting REIT stocks. According to Daishin Securities, REIT stocks that raise rents in line with inflation include SK REIT, JR Global REIT, Shinhan Seobu T&D REIT and KB Star REIT.
By Kang In-seon and Minu Kim
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