Maston Investment Management Publishes Overseas Real Estate Investment Strategy Report Amid Interest Rate Hikes

[Asia Economy Reporter Minji Lee] Maston Investment Management announced on the 1st that it has published a report themed on overseas real estate investment strategies during periods of rising interest rates.

According to the report "Overseas Real Estate Investment Strategies During Interest Rate Hikes" released by Maston Investment Management’s research division R&S (Research & Strategy), since the 2008 financial crisis, the real estate market has been influenced by various external factors such as global liquidity, market liberalization in different countries, and the influence of institutional investors, resulting in a gradual reduction in sensitivity to interest rates.

It also analyzed that despite a decrease in transaction volume due to COVID-19, commercial real estate prices have shown a steady trend. It is expected that despite shifts in monetary policy stances of major countries in the future, real interest rates will remain at negative levels, leading to continued capital inflows into the market for the time being, and thus the risk of asset price volatility will not be significant.

The report explained that past interest rate increases did not necessarily lead to rises in cap rates (capitalization rates) or declines in asset prices. This is because cap rates are influenced by various factors beyond interest rates, including economic cycles, demographics and industrial structure, and investment demand.

Furthermore, it forecasted that real estate investment returns during periods of rising interest rates are linked to inflation, enabling inflation hedging. While interest rate hikes may reduce investment demand due to the possibility of declining yields caused by higher financing costs, rents are linked to price indices, resulting in increased operating income and significant inflation hedging effects. Historical trends also show that the inflation hedging effect of commercial real estate is relatively greater compared to stocks or bonds.

Jihyojin Ji, head of the Global Research Team at Maston Investment Management’s R&S division, stated, “Market volatility has increased due to accelerated trend changes caused by COVID-19,” and added, “It will be necessary to reduce asset price volatility through portfolio rebalancing at the point of economic cycle recovery.”

Specifically, the core strategy proposed selective investment in gateway city centers with high liquidity and resilience, multi-tenant assets with short lease maturities that can immediately reflect rent increases through tenant improvements, and assets rented at low costs relative to market prices.

Meanwhile, Maston Investment Management established the Global Research Team under the R&S division this year to expand overseas markets and continuously discover innovative products. Jihyojin Ji, who previously worked at Samsung Life Insurance and Samsung SRA Asset Management, joined the Global Research Team in June. Maston Investment Management’s R&S division plans to continue releasing in-depth reports containing comprehensive analyses and investment strategies on domestic and international commercial real estate markets.

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