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Asia Pacific REITs Down in August On Interest Rate Jitters

Despite REITs’ volatility during the month, earnings season shows steady rental and earnings growth

By Victor Yeung, Chief Investment Officer, Admiral Investment Limited and Adjunct Associate Professor, Department of Real Estate and Construction, The University of Hong Kong

September 3, 2022 – The top 100 most-traded REITs in the Asia Pacific dropped 4% in August, compared to a fall of 1.4% by the MSCI AC Asia Pacific following Jerome Powell’s hawkish Jackson Hole message.

For REIT markets in the region and worldwide, July’s rally lasted until the Jackson Hole meeting on August 26. 

In July’s Federal Open Market Committee (FOMC) meeting, the US central bank had hinted that it would base its interest rate policy on future data flow. The July Consumer Price Index (CPI) came in below consensus, suggesting that inflation might have peaked. The data led to expectations that this round of interest rate increases would peak soon, with investors largely pricing in a drop by March next year.

However, at the Jackson Hole meeting, Jerome Powell – the Federal Reserve Chairman – was more hawkish than expected. This led to a selloff in multiple markets, including most REITs. 

At one point, interest rate futures suggested that the Federal Reserve would maintain its peak interest rate through 2023. But by September 1, the futures curve reverted to similar levels before August 26. 

The volatility last month is an effect of REITs being traded as listed securities on stock markets. With interest rate expectations changing rapidly throughout 2022, REITs have seen more volatile than usual. 

Despite the volatility, REITs delivered steady rental growth. In August, several REIT markets had their reporting seasons, and the earnings showed that REITs continued to generate steady cash flow, supporting their total performance. While total return (dividends plus capital gains) is the ultimate metric that investors track, REITs’ ability to generate cash during choppy periods makes the asset class attractive. Cash income can help pay bills, service interest costs and serve as fresh capital when asset prices are discounted.

For previous months’ analyses, click here.

REIT IndexPerformanceCorresponding equity indexPerformance
 Aug 2022YTD-2022 Aug 2022YTD-2022
GPR 250 REIT Index-6.2%-18.7%MSCI WORLD-4.1%-17.5%
GPR Aprea Investable REIT 100 Index-4.0%-15.5%MSCI AC ASIA PACIFIC-1.4%-20.0%
GPR Aprea Investable REIT Australia-5.8%-17.7%MSCI Australia-1.0%-7.3%
GPR Aprea Investable REIT Japan-2.5%-15.9%MSCI Japan-2.5%-17.7%
GPR Aprea Investable REIT Singapore-3.9%-6.3%MSCI Singapore-1.8%-14.8%
GPR Aprea Composite REIT Index Hong Kong-2.9%-14.0%MSCI Hong Kong-3.5%-9.7%
GPR 250 REIT United States Index-6.1%-18.5%MSCI USA-3.9%-17.1%
GPR 250 REIT United Kingdom Index-15.1%-33.6%MSCI UK-5.6%-10.8%
Based on the market close on August 31, 2022     
All performance numbers are based on total gross returns in USD     
Sources: GPR and Bloomberg