'Zero Interest Rate' Era... How to Invest in Real Estate with the Price of a Cup of Coffee?

[Asia Economy Reporter Park Jihwan] Methods that allow investment in real estate such as housing and offices for the price of a cup of coffee are attracting great interest from investors dreaming of becoming building owners.

First, the most popular method is investing in public REITs. Public REITs are products that turn real estate into stocks, allowing an unspecified number of investors to easily buy and sell them. They offer stable dividend yields of around 5-6% as well as the advantage of being listed on the stock market, enabling redemption at any time.

Currently, as countries around the world have significantly lowered benchmark interest rates and this trend is expected to continue, public REITs have relatively higher investment attractiveness compared to other asset classes. In particular, as commercial districts affected by the COVID-19 pandemic gradually stabilize, REIT yields are expected to regain attention in this ultra-low interest rate era.

Looking at the share price of recently listed public REITs on the stock market, it is around 5,000 won. This means accessibility is higher than any other real estate investment. From this year, investors in public REITs also benefit from a separate taxation system with a low tax rate of 9.9% (including local income tax) on dividend income.

Another way to invest in real estate through stocks is to directly purchase shares of companies that own a lot of real estate assets. Some companies list real estate assets worth hundreds of billions of won on their financial statements at book values less than one-tenth of market prices. Most of these companies face inheritance tax issues. From the major shareholder’s perspective, the higher the market capitalization, the more taxes they have to pay.

Direct investment methods, like public REITs, allow investment with small amounts of capital and have the advantage of good liquidity in case cash is suddenly needed. Typical real estate investments require huge capital and are often criticized for the heavy tax burdens such as capital gains tax and property tax.

This content was produced with the assistance of AI translation services.