After becoming the epicenter of the coronavirus pandemic, China is slowly regaining its economic composure and its real estate market is following closely. The housing sector is already showing strong vital signs on the country’s path to recovery, according to some market analysts, per a CNBC report.
“Urbanization and upgrading are key demand drivers. Property prices are recovering and developer profitability is improving,” said Hayden Briscoe, head of fixed income for the Asia Pacific at UBS Asset Management, according to the CNBC report.
Furthermore, “Briscoe said the firm is positive on larger developers, which are growing market share as smaller players exit the industry. Commercial property, however, should be avoided as it could be facing downward rental pressure due to the outbreak, he said.”
At the height of the pandemic, housing sales were in a slump amid lockdown and social distancing measures. Since then, sales “jumped 9.7% in May, compared with a 2.1% fall in April, according to Reuters. Funds raised by China’s property developers fell 6.1% in the January to May period, compared to a 10.4% drop for the first four months of 2020, the report said.”
“China’s recovery will benefit Asian high-yield bonds directly as China’s share of the Asian high-yield universe is close to 50%,” Briscoe added.
Investors looking to get a piece of China’s real estate action can do so via exchange-traded funds (ETFs) that track global real estate.
Real Estate Exposure via ETFs
ETF investors can look to a fund like the Xtrackers International Real Estate ETF (HAUZ), which seeks investment results that correspond generally to the performance of the iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index. iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index is a free-float capitalization weighted index that provides exposure to publicly traded real estate securities in countries outside the United States, Pakistan, and Vietnam.
The MSCI All Country World Index (ACWI) ex-USA is a market-capitalization-weighted index designed to provide a broad measure of stock performance throughout the world by tracking the performance of 22 developed and 24 emerging markets.
Another fund to look at for core real estate exposure is the Vanguard Real Estate ETF (VNQ ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments.