Friday, September 27, 2013
TSE REIT Index Closes Above 1,500 On Lower Interest Rates
TOKYO (NQN)--The Tokyo Stock Exchange index that tracks real estate investment trusts rose Friday in response to lower interest rates and a firming property market.
The TSE REIT index climbed 23.39 points, or 1.58%, to end the session at 1,503.06, closing above the psychologically important 1,500 mark for the first time since May 21. The REIT market is also being buoyed by expectations public pension operators will buy REITs.
The yield on the newly issued 10-year government bond fell to 0.665% on Sept. 19, the lowest level in four months, and yields have stayed down. Lower interest rates are seen as a plus for the REIT market because they lower the cost capital for property developers.
Low interest rates also encourage investors to buy REITs in place of other financial instruments such as bonds. The compound interest rate based on a weighted average of all listed REITs is around the mid-3% range. The yield on REITs thus appears attractive.
Rising land prices are another positive factor for REITs. According to data released Sept. 19 by the Land Ministry, average land prices in the greater Tokyo, Osaka and Nagoya areas rose 0.1% on the year on July 1, climbing above zero for the first time in five years.