Economy

In 2023, the housing market reached unprecedented heights, with median home prices soaring to an all-time high of $389,800.

While mortgage rates reached 40-year highs there was still robust demand as the microeconomics of the market continued to put upward pressure on prices. Experts predict that this trend will continue into 2024, as mortgage rates are expected to decline due to the Federal Reserve’s plan to lower benchmark interest rates.

REITs, traded on stock exchanges, allow investors to gain exposure to real estate without direct property ownership. They distribute at least 90% of taxable income to shareholders through dividends. 

While real estate investment trusts (REITs) are popular for diversifying portfolios and generating passive income, the private real estate market also offers rewarding opportunities. They can have higher IRR with more active positions but carry increased liquidity risk. 


Finsum: Investors should be extra cautious of liquidity risk in high interest rates, but the returns could certainly be worth it. 

Real estate investment trusts, known as REITs, are renowned for their attractive dividend yields, as they are legally obligated to distribute 90% of their post-tax earnings to shareholders. However, REITs are highly sensitive to various market factors such as interest rates, inflation, leverage, and regulatory changes, posing liquidity concerns for investors.

 

While dividend yield is crucial, conservative investors also consider factors like analyst ratings and liquidity when evaluating REITs. The highest-yielding REITs, according to Rick Orford, based on specific criteria, including annual dividend percentage, trading volume, number of analysts, and current analyst ratings are Vici Properties, showcasing notable revenue growth and offering a promising dividend yield of 5.71%. Starwood Property Trust, recognized as the largest commercial mortgage REIT in the US, presents a forward yield of 9.81%, notwithstanding mixed financial performance in 2023. Redwood Trust emerges as a standout contender with the highest forward yield of 11.24% and an optimistic outlook for future earnings growth, bolstered by its diversified investment portfolio.


Finsum: If interest rates have peaked REITs are poised to deliver huge returns in 2024 and 2025.

Rising inflation and heightened borrowing costs are diminishing the appeal of leveraged private-market investments, but despite these challenges, institutional investors in the Asia-Pacific region remain committed to expanding their allocations in private assets, particularly in real estate and private debt, as highlighted in the firm's recent annual report. 

 

Among the 120 Asia-Pacific-based institutional investors surveyed, 58% anticipate further inflation escalation, while 65% express concerns about elevated borrowing expenses linked to inflation affecting leveraged private-market investments adversely.

 

However, amid these macroeconomic headwinds, financial institutions in the region remain bullish on private markets and are planning to boost allocations in the short and medium terms, with private debt emerging as a favored asset class.  The survey also indicated a growing trend of institutional investors allocating more than 30% of their portfolios to private markets, with approximately 64% planning to elevate their allocations to private real estate in the medium run.


Finsum: Private real estate could be posed for a comeback as interest rates fall and remote work becomes more sparse.

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