How Interest Rate changes affect REITs
Real Estate Investment Trusts (REITs) are interest rate sensitive due mainly to 2 factors:- Cost of borrowing changes
- Attractiveness of REIT as an investment asset versus alternative investments
Real estate investment trusts (REIT) is a class of stock investment that many believe are very much affected by global interest rate changes.
For the past 35 years, the world have been in an environment where interest rate is getting lower and lower. There are periods where interest rate do rose, however the trend is down.
For the past 5 years, there have been on and off voices that warns us that interest rate is about to rise.
Bonds, which are interest rate sensitive, and pseudo-bond like instruments such as MLPs, REITs, business trusts, highly leveraged stocks, utilities are not going to fare well.
