I think a lot of the perception that equities are riskier than property could be traced to the fact that we get real-time pricing on the equity markets.
If we were back in the dark ages and you could only track your equity prices via quarterly updates, people would view them less risky as the long-term upward trend is more apparent than looking at a portfolio during some crisis and seeing that it's down 2% since the day before and 5% week-on-week.
Looked at another way, until the advent of REITS, many would have viewed their underlying commercial properties as less risky than the risk apparent when you look at British commercial REIT LAND and it's one year price chart, ranging between £4.60 and £7.84.
Lots of smaller commercial property owners probably still view their property as less risky because they are unaware of rises and falls in value until they come to sell - yet the values of commercial property are inextricably linked to the value of commercial REITS.
Sticking to the UK example, no one is going to pay the £1,000,000 you may have paid for a property yielding 4.6% when we had zero interest rates now, when you can achieve that same 4.6% from a hassle-free 15 year UK government bond.
If it were possible to trade individual residential properties via a ticker on the market, people would be shocked to see the value of their property change from day-to-day if some unexpected interest rate decision or other economic shock occured - and would probably refuse to believe that it reflected their properties true value because property is "not that risky", despite the falls we saw during the last recession.
If we were back in the dark ages and you could only track your equity prices via quarterly updates, people would view them less risky as the long-term upward trend is more apparent than looking at a portfolio during some crisis and seeing that it's down 2% since the day before and 5% week-on-week.
Looked at another way, until the advent of REITS, many would have viewed their underlying commercial properties as less risky than the risk apparent when you look at British commercial REIT LAND and it's one year price chart, ranging between £4.60 and £7.84.
Lots of smaller commercial property owners probably still view their property as less risky because they are unaware of rises and falls in value until they come to sell - yet the values of commercial property are inextricably linked to the value of commercial REITS.
Sticking to the UK example, no one is going to pay the £1,000,000 you may have paid for a property yielding 4.6% when we had zero interest rates now, when you can achieve that same 4.6% from a hassle-free 15 year UK government bond.
If it were possible to trade individual residential properties via a ticker on the market, people would be shocked to see the value of their property change from day-to-day if some unexpected interest rate decision or other economic shock occured - and would probably refuse to believe that it reflected their properties true value because property is "not that risky", despite the falls we saw during the last recession.
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