Expanding economies and historically low interest rates around the world have prompted investors to get a piece of the international real estate market. In June Citigroup Inc. bought a Hong Kong office tower for a record HK $5.4 billion ($697 million), which will house 5,000 employees.
Real estate became a very popular investment following the global financial crisis because of its relatively high yields and tangibility. More funds than ever are being invested in foreign real estate companies.
As demand for international real estate increases, so will the inflows into the top international real estate ETFs. Highlighted below are ETFs that have been affected by the increased interest in international real estate.
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SPDR Dow Jones International Real Estate ETF (NYSE: RWX)
The RWX led all property ETFs in August and took in $304 million during the month. RWX is currently the largest non-U.S real estate ETF on the market with $5.26 billion in assets.
With 113 holdings spread throughout 19 different countries, RWX offers a great deal of diversification. The top three weighted countries in the fund are Japan at 21.2 percent, the United Kingdom at 14 percent and Australia at 13.8 percent.
The fund has returned 10.3 percent year to date, slightly outperforming the S&P 500's 9.3 percent year to date. The ETF has an expense ratio of 0.59 percent and a dividend yield of 2.2 percent.
Vanguard Global ex-U.S Real Estate ETF (NASDAQ: VNQI)
VNQI is the second largest international real estate ETF on the market with $2.7 billion in assets. It consists of 556 stocks distributed among 39 different countries -- a much more diversified option than its competitors. Its largest weighted countries are Japan at 24 percent, Hong Kong at 13.4 percent and Australia at 10.5 percent. VNQI is up 9.8 percent year to date, narrowly outperforming the market.
With an expense ratio of 0.27 percent VNQI beats its competitors by more than 50 percent. The ETF does not currently pay a dividend.
Guggenheim China Real Estate ETF (NYSE: TAO)
TAO measures the performance of publicly traded companies and real estate investment trusts (REITs) in China. TAO consists of 56 different securities weighted entirely between two Asian countries. Hong Kong has the largest weight at 82.9 percent followed by the rest of China at 15.5 percent and Singapore at 1.2 percent. TAO is a favorable option to the investor looking to ride the real estate wave in China and are okay with taking above average risk.
Liquidity and diversification are just a couple reasons why foreign real estate ETFs have become so popular. They give the investor exposure to real estate markets around the world that weren’t always available to the individual investor. By investing in a publicly-traded REIT ETF investors also have the benefit of liquidity, a characteristic not usually associated with real estate.
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