• Investing in Australia REITs: A Complete Guide

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    Australia has one of the most transparent, developed, and refined REITs markets in the world. With its first REIT introduced in 1971, it was only behind the US, Taiwan ROC, and New Zealand to introduce REITs.

    Nowadays, around two-thirds of all institutional-grade properties are publicly offered on the stock exchange and securitized, the highest rate in the world.

    Some of the REITs are known for performing significantly well and a few years back investors could enjoy increases of 10% annually.

    Even if A-REITs are frequently mentioned in the media and can be lucrative investments, there’s limited information online on how you can start investing in the trusts as a foreigner.

    Topics covered in this article:

    • Can foreigners buy REITs in Australia?
    • Foreign Institutional Investments in REITs
    • How can I invest in REITs in Australia?
    • What are the benefits of buying Australian REITs?
    • List of Australian REITs

    Can foreigners buy REITs in Australia?

    Publicly traded A-REITs are often listed on major stock exchanges and can be bought with the help of brokers. It’s as simple as that.

    It’s easier to start buying REITs in Australia compared to developing countries such as Vietnam where you have to manage local account openings and visit the country first. Much of the information found online is in Vietnamese, rather than English.

    There are also plenty of foreign REITs that have Australian properties under their portfolio, but we rarely see ownership of Vietnamese real estate.

    We will review some of the REITs later in this article.

    There are no specific REIT rules in Australia and they can be both publicly and non-publicly listed and sector-specific (ex. Industrial or retail).

    The REITs are categorized as Managed Investment Trusts (MIT) from an income perspective, to qualify as an MIT, a foreign investor cannot hold 10% or more in a REIT, directly or indirectly.

    Foreign Institutional Investments in REITs

    A key take-away is also that foreign institutions have no general issues to invest in Australian REITs under existing laws.

    With that said, this requires that you don’t exceed certain thresholds, and foreign control of trusts or fund managers is treated differently.

    The following non-real estate transactions might need approval from the Foreign Investment Review Board (FIRB) and that are subject to the Foreign Acquisitions and Takeovers Act 1975:

    • Acquisition of a trust that is valued at more than AUD 252 million. Investors from the US and New Zealand are subject to a higher threshold of AUD 1094 million
    • Direct investments by foreign government-related investors

    How can I invest in REITs in Australia?

    Investing in REITs is fairly simple and managed in a similar way as for stock investments. You first have to get in touch with a certified broker that can help you to buy the shares.

    Examples of brokers include Interactive Brokers and IG, for example.

    Keep in mind that transaction fees can be high and range up to USD 10 – 20 for a single transaction if you invest in REITs through brokers. The fees are sometimes subsidized for frequently returning customers or individuals and institutions that buy large volumes.

    Sometimes, the brokers require that you buy or sell a certain amount of REITs each month to enjoy lower transaction fees.

    What are the benefits of buying Australian REITs?

    REITs are famous for delivering good yields as 90% of the net profits are distributed to the shareholders. Below I have listed some of the main benefits of buying REITs in Australia.

    1. Market access

    Australia has seen a large influx of foreign investors, particularly from China, and the government has introduced different regulations depending on if you’re a temporary resident or non-resident, for example.

    To buy real estate as a non-resident foreigner in Australia, you have to apply for permission to the Foreign Investment Review Board (FIRB) first.

    Foreign non-residents can generally only buy new units, not established/second-hand units, without being subject to different conditions. You can theoretically buy an unlimited amount of new units, but each acquisition will need approval.

    By investing in REITs, you get access to both the commercial and real estate market.

    2. Generally good dividends

    REITs are well-known for providing high yields, REITs that target industrial and agricultural properties have performed better compared to trusts targeting office space and retail units.

    Even if A-REITs have lost -9% throughout 2020 due to the COVID-19 pandemic, we’ve seen exceptionally good performance among many REITs in the past years.

    Below you can find the historical yields for Goodman Group, one of the biggest REITs in Australia:

    • June 2016: 3.49%
    • Dec 2016: 1.99%
    • June 2017: 2.95%
    • Dec 2017: 2.78%
    • June 2018: 2.52%
    • Dec 2018: 1.94%
    • June 2019: 2.10%
    • Dec 2019: 2.05%
    • June 2020: 1.65%
    • Dec 2020: 1.55%

    3. Liquidity

    Shares of REITs can be bought in the same way as stocks and you can therefore buy and sell shares quickly and without a hassle.

    Compared to directly buying physical units, investing in REITs is undoubtedly more liquid.

    4. Low minimum capital

    The beauty of investing in A-REITs is that you can get access to Australian residential and commercial real estate in prime areas for as little as USD 500.

    Thanks to fractionalization and co-ownership, A-REITs are available for virtually anyone.

    List of Australian REITs

    There are currently around 70 REITs available in Australia, making it one of the biggest REIT markets in the world.

    With that said, it would be impossible for me to list every REIT here. Therefore, I have focused on some of the most interesting ones.

    Goodman Group (GMG)

    Goodman Group is the biggest industrial property group on the Australian Stock Exchange with operations in Australia as well as overseas. According to IG, the company had an occupancy rate of 97.5% in 2019, which is kind of astonishing.

    With assets worth a staggering amount of AUD 55.1 billion, the REIT possesses properties in Australia, New Zealand, Asia, Europe, and the UK. The REIT primarily owns warehouses, large logistics facilities, business parks, and office parks worldwide.

    The company has around 390 properties and 19.3 million square meters under management in 17 countries.

    As mentioned above, the group had the following dividend yields from 2016 to 2020:

    • June 2016: 3.49%
    • Dec 2016: 1.99%
    • June 2017: 2.95%
    • Dec 2017: 2.78%
    • June 2018: 2.52%
    • Dec 2018: 1.94%
    • June 2019: 2.10%
    • Dec 2019: 2.05%
    • June 2020: 1.65%
    • Dec 2020: 1.55%

    Scentre Group (SCG)

    Scentre Group manages and operates Westfield shopping malls in New Zealand and Australia and with AUD 56 billion in assets. The company was hurt through the COVID-19 pandemic and slightly recovered at the end of 2020.

    Scentre Group currently has 42 shopping centers in its portfolio with a value of more than AUD 50 billion. The company has more than 3.8 million square meters of retail space and 12,000 retailers.

    From 2016 to 2020, the company had the following dividend yields:

    • Aug 2016: 4.80%
    • Feb 2017: 9.82%
    • Aug 2017: 5.46%
    • Feb 2018: 5.10%
    • Aug 2018: 5.59%
    • Feb 2019: 5.53%
    • Aug 2019: 5.86%
    • Feb 2020: 7.93%

    Dexus Property Group (DXS)

    Dexus was launched in 1984 and primarily focuses on investments in industrial properties, office space, retail, and healthcare properties. The company currently manages around AUD 32 billion of assets under its portfolio.

    The company has an impressive portfolio with high-end properties in downtown Sydney and other affluent areas in Australia.

    From 2016 to 2020, the company had the following dividend yields:

    • June 2016: 4.72%
    • Dec 2016: 4.57%
    • June 2017: 4.45%
    • Dec 2017: 4.83%
    • June 2018: 4.35%
    • Dec 2018: 3.77%
    • June 2019: 4.23%
    • Dec 2019: 5.66%
    • June 2020: 5.20%
    • Dec 2020: 5.34%

    Mirvac Group (MGR)

    Mirvac was founded in 1971 with operations in the property development, investment, and retail services sectors. The company currently owns almost 60 properties with a value of AUD 7.8 billion.

    The company focuses on investments in retail centers, offices, and industrial properties.

    From 2016 to 2020, Mirvac had the following dividend yields:

    • June 2016: 4.78%
    • Dec 2016: 4.65%
    • June 2017: 4.19%
    • Dec 2017: 4.77%
    • June 2018: 4.82%
    • Dec 2018: 3.59%
    • June 2019: 3.40%
    • Dec 2019: 5.19%
    • June 2020: 3.40%
    • Dec 2020: 2.84%

    Other interesting REITs:

    • Stockland Corporation
    • GPT Group
    • Charter Hall Group
    • Shopping Centres Australia
    • BWP Trust Retail
    • Growthpoint Properties Australia

    For a complete overview of all A-REITs, you can check the REITs listed on the Australian Stock Exchange’s website.

    FAQ

    Below I have included some commonly asked questions among investors and my replies. If there’s anything else you wonder about, feel free to write a comment below or send us an email.

    How many REITs are there in Australia?

    As shown on the Australian Stock Exchange’s website, there are currently 50 REITs available in Australia. 3 of the REITs are global while the remaining are for the Australian market.

    What is a stapled REIT?

    Most of the REITs in Australia have a structure referred to as stapled securities. In short, this means that the stapled security comprises one unit in the trust and one share in the company that manages the asset base, thus the name “stapled security”.

    Disclosure: This information is intended for educational purposes. It does not constitute investment advice and should not be considered as a recommendation for investment. The writer of the article and the owners of the website don’t own any of the securities/REITs mentioned in the article. Note that the value and income of investments can go up, as well as down (resulting in a loss).

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