Investing in Property ETFs
Exchange-Traded Funds (ETFs) can be a good way for investors to gain exposure to an entire industry, market or economy through a single investment, reducing the risk and headaches involved in picking individual stocks. In this article, we will take a look at investing in property ETFs, highlighting 5 different options for investors to consider in 2024.
Table of Contents
What Is a Real Estate ETF?
A real estate ETF, or property ETF, is a type of Exchange-Traded Fund which has been designed to track a portion of the real estate sector.
The exact way in which property ETFs do this will vary depending on the ETF in question. However, typically, the ETF managers will use a pool of investor money to invest in companies which operate in the property sector, including Real Estate Investment Trusts (REITs).
One of the main benefits of using ETFs to invest in property, or to invest in anything for that matter, is that they provide investors with instant diversification, which can help reduce the risks involved.
However, with high interest rates, an ongoing cost of living crisis and a slowing economy, the outlook for the property market is somewhat uncertain, and many property ETFs have struggled in recent years. Therefore, before investing in a property ETF, it is important to conduct your own research and make sure you are aware of the risks involved.
Property ETFs to Watch
There are a wide number of property ETFs available for investors to choose from, each of which are designed to track different segments of the property market. In the following sections, we will take a closer look at a few popular options, each of which has a different geographical footprint.
iShares UK Property ETF
Source: iShares – Total return data as of 31 October 2023. Distribution yield as of 6 November 2023. Past performance is not a reliable indicator of future results.
As the name suggests, this is a property ETF which focuses on the UK real estate market, investing in listed real estate companies and REITs. It is evident from the table above that this UK property ETF has not performed well in recent years, although it does offer a decent quarterly distribution at the current price.
At the time of writing, the fund has 42 holdings, the top ten of which account for roughly 65% of the entire ETF. The table below shows these top ten holdings in descending order of their weighting.
iShares European Property Yield ETF
Source: iShares – Total return data as of 31 October 2023. Distribution yield as of 3 November 2023. Past performance is not a reliable indicator of future results.
This real estate ETF tracks an index composed of listed real estate companies and REITs based in developed European countries, excluding the UK. Constituents must also have a forecast dividend yield of equal or greater than 2%.
There are currently 59 holdings in this European real estate ETF. The top ten holdings account for around 55% of the entire portfolio and are listed in the table below according to their weighting.
Xtrackers FTSE Developed Europe Real Estate ETF
Source: Xtrackers – Data as of 7 November 2023. Past performance is not a reliable indicator of future results.
The Xtrackers FTSE Developed Europe Real Estate UCITS ETF focuses on listed real estate companies and REITs in developed Europe, including the UK, making it somewhat of a combination of the previous two property ETFs in our list.
We can see from the table above that, over the longer 10-year period, this developed Europe real estate ETF has performed significantly better than the previous two ETFs, and also has a lower annual fee.
There are currently 114 holdings in the portfolio, making this a more diversified real estate ETF than the previous two. The top ten holdings account for a lesser 40% of the entire portfolio, and are listed in the table below.
iShares US Property Yield ETF
Source: iShares – Total return data as of 31 October 2023. Distribution yield as of 6 November 2023. Past performance is not a reliable indicator of future results.
Heading over the Atlantic, this next ETF is designed to track a selection of US real estate companies which have a forecast dividend yield of 2% of more.
Although this property ETF has not performed well recently, its longer term performance has been superior to the other ETFs we have examined so far.
At the time of writing the fund has 99 holdings. The top ten holdings account for roughly 50% of the entire portfolio and are listed in the table below according to their weighting.
SPDR Dow Jones Global Real Estate ETF
Source: State Street Global Advisors – Total return data as of 31 October 2023. Distribution yield as of 6 November 2023. Past performance is not a reliable indicator of future results.
Finally, we come to the SPDR Dow Jones Global Real Estate UCITS ETF, which tracks the performance of the global real estate market by investing in REITs and real estate operating companies.
Whilst this ETF is likely to appeal to those seeking exposure to the global real estate market, it is worth noting that, despite its global reach, roughly 70% of the holdings are based in the US.
At the time of writing, the fund has 238 holdings, with the top ten accounting for roughly 35% of the portfolio. The top ten holdings are listed in the table below according to their respective weighting.
How to Invest in Real Estate ETFs
With an investing account from Admirals, you can buy shares in the real estate ETFs examined in this article. Follow these steps to find out how:
- Open an Invest.MT5 account and log in to the Dashboard.
- Click ‘Invest’ next to your account details to open the web trading platform.
- Search for the property ETF in which you want to invest and click the symbol to open a price chart.
- Press ‘Create New Order’, enter the number of shares you wish to purchase and hit ‘Buy’ to send your order to the market.
Property ETFs – FAQ
How Do Property ETFs Work?
Property ETFs use investor money to invest in property related securities, namely Real Estate Investment Trusts (REITs) and other listed companies operating in the sector.
Are Property ETFs a Good Investment?
Property ETFs can be a good investment for those looking to gain exposure to the property market. Investing in property ETFs provides instant diversification across a number of different assets, which can help reduce the risks involved when picking individual stocks.
However, that doesn’t mean that every property ETF is a good investment. Before investing, it is important to conduct your own independent research and to make sure you are aware of the risks involved.
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