Is REIT a good investment now Malaysia?
The value of property in Malaysia continues to appreciate over the long term. As Malaysia maintains itself as an oil and gas, electrical and electronics, and manufacturing hub as well as a popular tourist destination, REITs are a good proxy for the Malaysian property market.
Real estate investment trusts (REITs) finished last year as one of the S&P 500's top performing sectors, generating a total return (price appreciation plus dividends) of +46.2%, vs. +28.7% for the index as a whole. Investors positioned in the best REITs could be set up for even more outperformance in 2022.
- Axis REIT (Annualised return: +10.74%)
- Sunway REIT (Annualised return: +7.71%) ...
- Pavilion REIT (Annualised return: +10.68%) ...
- Atrium REIT (Annualised return: +6.50%) ...
- IGB REIT (Annualised return: +6.19%) Since 2012, every RM1,000 investment in IGB REIT would've turned into RM1,590. ...
A great way for everyday investors to get rich from real estate is to buy real estate investment trusts (REITs). These are companies that buy, sell, and manage pools of properties and have a tax-law obligation to pay out at least 90% of their taxable income in the form of dividends.
| Real Estate Investment Trust (REIT) | Portfolio | Stock Code |
|---|---|---|
| Pavilion REIT | Retail, Office | 5212 |
| Quill Capita Trust | Commercial, Carparks, Office, Industrial | 5123 |
| Sunway REIT | Retail, Hotel, Office | 5176 |
| Tower REIT | Office | 5111 |
2) Are REITs tax free? No. If 90% or more of its total income is distributed to unit holders, a real estate investment trust in Malaysia is exempt from income tax. However, the fund will still be taxed a Withholding Tax at 10%.
Attractive income
One reason REITs have generated solid total returns over the long term is that most pay attractive dividends. For example, as of mid-2021, the average REIT yielded over 3%, more than double the dividend yield of stocks in the S&P 500.
The S&P 500 was up 27%, with REITs as one of its top-performing sectors (+46.2%). In 2022, real estate stocks are a top choice amid heightened market uncertainty. They tend to provide higher yields, better values, strong growth rates, and solid profitability. REITs can also serve as an inflation hedge.
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Digging into the historical data: REITs vs. stocks.
| Time period | S&P 500 (total annual return) | FTSE NAREIT all equity REITS (total annual return) |
|---|---|---|
| 1972-2019 | 12.1% | 13.3% |
- IHH Healthcare Bhd. ...
- Tenaga Nasional Bhd. ...
- Magnum Bhd. ...
- Hartalega Holdings Bhd. ...
- Gamuda Bhd and Sunway Construction Group Bhd. ...
- Genting Malaysia Bhd.
How much should you invest in REITs?
Private REITs
Private REITs may have an investment minimum, and that typically runs from $1,000 to $25,000, according to NAREIT, the National Association of Real Estate Investment Trusts.
High payout ratio. REITs are able to pay high dividends because they're required to pay 90% of their taxable income to shareholders. However, that taxable income doesn't include tax deductions like depreciation. That gives them some room to keep cash on hand.
Publicly traded REITs are a safer play than their non-exchange counterparts, but there are still risks.
Getting started is as simple as opening a brokerage account, which usually takes just a few minutes. Then you'll be able to buy and sell REITs just as you would any other stock.
When choosing what REIT to invest in, make sure you know the management team and their track record. Check to see how they are compensated. If it's based upon performance, chances are that they are looking out for your best interests as well. REITs are trusts focused upon the ownership of property.
If a (Real Estate Investment Trusts) fund distributed at least 90 percent of their total yearly income to unit holders, the REIT itself is exempted from tax for that year of assessment. However, unit holders are liable to tax on the distribution of income.
REITs offer investors the benefits of real estate investment along with the ease and advantages of investing in publicly traded stock. REITs have historically provided investors dividend-based income, competitive market performance, transparency, liquidity, inflation protection and portfolio diversification.
REITs tend to pay out steady incomes (similar to dividends), which are derived from existing rents paid by tenants who occupy the REITs' properties. Professional management: You benefit from having the REIT and its underlying assets managed by professionals who will add value for a higher yield.
