Real estate

Why invest in real estate?

Sustainability of returns and coping with more volatile financial markets have become increasingly important factors for investors to consider. As a result, there is a general acceptance that investors should embrace a more diversified approach to their investments to include real estate.

The benefits of investing in real estate are both compelling and wide ranging.

Diversification

Real estate allows investors to spread some of the risk in a balanced portfolio, mainly because the returns from real estate have a low correlation with those from equities and bonds over the longer term.

Stability of income

Income from real estate takes the form of rent paid by tenants. Real estate yields over the last 30 years have been consistently higher than most fixed interest securities and the dividend yield available on equities. Meanwhile, the relatively long-term nature of rental contracts can provide investors some stability of income.

Performance

Real estate has provided excellent returns over the medium and long term, outperforming equities (FTSE All-Share Index) and delivering returns similar to bonds (FTSE British Government All Stocks Index) over the 10-year period*.

Inflation hedging

Real estate has typically provided returns over and above that of the rate of inflation. This is important as it can protect your clients’ capital from the erosive effects of rising prices.