Factors Affecting Return of REITs
From Financial Literacy Wiki
What are the factors affecting the Return of REITs? Below is a list of them.
REITs unit holders are subject to similar risks as holders of other diversified asset portfolios. Some of the factors which affect returns on REITs are :
- Changes in rental income and property prices arising from changes in market conditions. As REITs are intended to be invested primarily in real estate assets, a decline in the general level of real property prices could adversely affect the value of a REIT. The overall depth and liquidity of the real estate market and other assets in which REITs are invested may fluctuate, which could correspondingly affect the depth and liquidity of trading in REITs
- The overall performance or expected performance of the real estate industry and other related industries, or by the general economic climate and outlook;
- Wear and tear, and disasters which damage physical real estate assets owned by the REITs
- Substantial increase/fall in interest rates, making listed REITs less/more attractive as an investment instrument, thus affecting the market price of REITs
- Professionalism & experience of the property management firm
- Quality of assets owned by the REITs, essentially affecting sustainability and stability of revenues; the better the quality, the higher the rental income and occupancy rates the REITs can secure.
- Laws and taxation changes affecting real estate property prices which might impact on returns on REITs. REITs participating in properties or investments outside Singapore may be subject to the risks of fluctuations in currency values, differences in generally accepted accounting principles, or local economic or political events in the countries in which those properties or investments are located
- The length of lease the property management firm can secure and the confidence of the tenants.
- Any other factors affecting returns of the underlying assets.
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