The effect of the COVID-19 pandemic of REITs, is it a good investment under global pandemic

Abstract

REITs are an investment trust that provides an indirect method for global investor to invest in the real estate market. It provides certain advantages for the investor such as lowering the entry barrier and liquidity of the capital assets which make it a popular investment option for recent decades. Moreover, the real estate market is classified as a hedging asset due to its stability and steady value-added trend. This paper consists of 2 study stages to achieve its research purpose. Firstly, it explores the analysis of the impacts of the Covid-19 pandemic on REITs market which aims to compare with other hedging assets whether the real estate market remains stable during the pandemic. By conducting the investigation analysis using past research, we can gain an understanding of stability, the real estate market and the foundation of REITs by looking at the past research. From stage 1 study, the Western market performed better in ROI (return of investment) than the Asian market, indicating that the government response and extent of the prevention policies or action affect the performance of REITs market. And REITs, invested in real estate market, had better performance than other hedging assets such as banking industry and public utilities sector. However, less stability and extreme fluctuations were observed in comparison to pure hedge assets – gold. The study concluded that REITs can be considered as protection assets if there is another pandemic outbreak. For stage 2 study, the observed limitations in stage 1 provided insight for further investigation deeply into each sector in the real estate market. This was to determine whether different sub-sectors had different performance during Covid-19 and use the analysis and the statistics of Covid to find the rationale behind the differences. There are a number of factors that affect their performance in the study, including the operation mode, the nature of each sector and the trend of development in that sector. The concluded correlation between the real estate market performance with the global pandemic can serve as a reference for REITs performance under the pandemic. This is if there is another global pandemic happening in the future.