Is real estate defensive or cyclical?
Real estate is generally categorized as a more cyclical investment, along with basic materials, financial services, and consumer discretionary. In other words, when times are good, real estate goes up an vice versa.
Apartment REITs
Apartment real estate investment trusts (REITs) are also deemed defensive, as people always need shelter.
Cyclical industries include resources, energy, financial services, real estate and discretionary retailers that benefit from consumers having more disposable income. Some examples of cyclical stocks listed on the ASX include Caltex, IAG, Steadfast, Corporate Travel Management, Qube and Suncorp.
Key Takeaways. Cyclical stocks are affected by macroeconomic changes, where its returns follow the cycles of an economy. Cyclical stocks are generally the opposite of defensive stocks. Cyclical stocks include discretionary companies, such as Starbucks or Nike, while defensive stocks are staples, such as Campbell Soup.
Cyclical stocks represent companies that make or sell discretionary items and services that are in demand when the economy is doing well. They include restaurants, hotel chains, airlines, furniture, high-end clothing retailers, and automobile manufacturers.
There are three main defensive sectors: Utilities, Consumer Staples, and Health Care. Utilities: Water, gas, and electric utilities are needed in all phases of the business cycle.
Consumer staples, healthcare, telecommunication services, utilities, and certain commodities are examples of defensive sector industries. When investing in these funds, avoid putting all of your money in one sector, and instead aim for diversification in the sectors and sub-sectors you invest in.
Why is real estate cyclical? A degree of cyclicality follows from occupier demand, with rental growth tied to the performance of the underlying economy. The behaviour of investors, particularly their susceptibility to fear and greed, can exacerbate these undulations.
Government policies and tax regulations affect real estate cycles and the demand for real estate investment. Low interest rates designed to spur investment are contributing to the rapid rise in housing prices and the subsequent demand for single-family rental homes.
- Vanguard Consumer Discretionary ETF.
- Fidelity® MSCI Consumer Discret ETF.
- Invesco S&P 500® Equal Wt Cnsm Disc ETF.
- Consumer Discret Sel Sect SPDR® ETF.
- SPDR® S&P Homebuilders ETF.
- iShares US Home Construction ETF.
- VanEck Retail ETF.
Is real estate a good industry to work for?
Real estate agents usually work independently. They prepare their own schedules, grow their own clients, and decide on their own marketing strategies. Though a little offbeat from the regular job profiles, a career in the real estate sector can be quite lucrative.
A top reason people explore real estate is that they are fascinated by it. They get a thrill from touring properties and imagining how to transform spaces and build lives within them. They can readily imagine how to increase property values through a few well-chosen upgrades.
Over the years, real estate has proven to be one of the top industries to work in. According to Forbes, real estate was the second happiest industry to work in 2016. According to the Top National Workplaces survey by WorkplaceDynamics, real estate was the best industry to work in 2013 .
