Listed property
As you may have guessed, listed property is just that, held by an organisation that is listed on a public exchange like the Australian Stock Exchange (ASX). So, you can invest in the organisation holding the underlying property and that investment can be bought and sold like shares. Another term you may have heard for listed property is a REIT, which stands for Real Estate Investment Trust.
The flow chart below details how REITs deliver returns to investors:
- Investors can buy a unit or ‘share’ of a REIT;
- The REIT pools together the money from investors to buy and manage different properties;
- The REIT receives rental income from the properties it holds and proceeds from properties it sells; and
- That income is then paid out on a regular basis to investors in the form of distributions.
How REITS work
Why we invest in listed property
The key benefit for investing in listed property (as opposed to unlisted property) is that it makes buying and selling listed property quicker as the share market trades nearly every weekday. So, if a super fund would like to manage how much it has invested in the property market (increase or decrease its exposure), it's much easier to do so versus unlisted property.
Understanding the volatility risk
As listed property can be easily bought or sold via a stock exchange, investing in it operates similarly to trading shares. While this has its benefits, the downside is that listed property returns are typically more volatile than unlisted property as performance is also more closely linked with the ups and downs of the share market.