We are currently in the midst of one of the most prolonged economic slowdowns in decades. While signs of life have been returning to the equity and credit markets, the short-term outlook still remains one of uncertainty, compounded in the sector of real estate. This is a shame. Property as an investment offers diversification benefits coinciding with high dividend yields. This is added to its benefit of low correlation to equities and bonds. However, as the main destroyer and cause of the current crisis, the asset class has fared pretty poorly in recent months. The broad U.S. real estate portfolio measured by the iShares Dow Jones U.S. Real Estate (NYSE:IYR) is still well off its $90-plus highs. With experts and various analysts still spelling doom and gloom for the sector, especially in commercial real estate, investors in the sector are making speculative bets at best. However, for investors willing to pack their passports, the story is very different one.

IN PICTURES: Digging Out Of Debt In 8 Steps

Think Globally
While the market for real estate in the United States is still experiencing some rocky footing, globally the asset class is once again booming. Since the mid-nineties, nearly 30 varied countries, from Singapore to France, have adopted the Real Estate Investment Trust (REIT) tax structure. Prior to 1990 only four nations had REITs. The global real estate sector's market capitalization has expanded several fold, from $165-742 billion from January, 1990 to today. Despite this explosive growth, the global securitized real estate market is relatively small, compared to the broad international equity and fixed income markets. This gives the sector more for growth over the long term. In addition, by focusing our real estate dollars outside of the United States borders, we gain access inefficiencies in pricing. Globalization, while giving areas access to capital investment, has not changed supply and demand dynamics or other local operating characteristics intrinsic to local real estate markets.

Adding International Real Estate via ETFs
With the recent exchange traded fund boom, adding international real estate to a portfolio has never been easier. Several different funds exist, following different global property indexes.

The iShares S&P Developed ex-U.S. Property Fund (AMEX:WPS) measures the investable market for real estate companies domiciled in the developed world, outside of the United States. Currently, the fund holds 228 different real estate stocks, across 20 different country allocations. With Japan and Hong Kong, the two largest international REIT markets at nearly 50% weighting. The fund yields 3.14% and charges 0.48% in expenses.

Also launched from the successful line of iShares ETFs comes the FTSE EPRA/NAREIT Dev RE ex-U.S. (Nasdaq:IFGL). This fund focuses its attention on Canadian, European and Asian real estate markets. This includes a small 6% weighting to China, as well as other emerging nations. The index fund is up over 36% year to date.

The first ETF to enter the space is also one of the best. The SPDR Dow Jones International Real Estate (NYSE:RWX) was first launched 2006 and holds 132 different REITs and property managers from around the world, excluding the United States. The fund is also the most heavily traded at a three-month average of 182,000 shares each day. The iShares funds only average 30,000 a day. The SPDR charges 0.59% in expenses and yields 4.14%. For investors wanting one trade for their real estate dollars, State Street (NYSE:STT) offers the SPDR Dow Jones Global Real Estate (NYSE:RWO), which adds U.S. REITs to the mix.

The Bottom Line
While the health of the United States real estate market is still in question, the global market for property is beginning to return to its former glory. As a low correlated asset that is often missing from investors' portfolios, gaining exposure to the segment is easy through exchange traded funds. The aforementioned ETFs offer an easy way to access this market. (For related reading, check out ETFs Vs Index Funds: Quantifying The Differences.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
  2. Mutual Funds & ETFs

    ETF Analysis: Ultra Oil & Gas

    Find out more about the ProShares Ultra Oil & Gas exchange-traded fund, the characteristics of the ETF and the suitability and recommendations for the fund.
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  5. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Value

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
  8. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares 10-20 Year Treasury Bond

    Learn about the iShares 1-20 Year Treasury Bond ETF and its holdings, and understand why investors may be better served to look at other bond funds.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Global Telecom

    Learn about the iShares Global Telecom exchange-traded fund, which invests in U.S. and foreign telecommunication companies with high dividend yields.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!