Investing

What are the best ASX property and real estate ETFs?

How to invest in property using an exchange traded fund (ETF). We compare the best ETFs that hold real estate.

Owning a property is often described as the Great Australian Dream. However the surge in Australian house prices has become a barrier to getting into the property market.

Exchange traded funds (ETFs) provide a great avenue for investors to gain access to the property by investing in real estate investment trusts (REITs). 

REITs are an indirect way of owning property by investing in companies that own income-producing real estate across a range of sectors such as residential, commercial and industrial. For example, they could own things like shopping centres (e.g. Westfield), office spaces (e.g. Dexus) and hotels (e.g. Marriott and Hilton). 

Stockspot reviews and compares the more than 250 ASX listed ETFs in our annual Stockspot ETF Report. In this article, we road test the best Australian and global property ETFs across a range of different metrics to provide our analysis on the most suitable choice

In this ETF review, we take a look at the following categories:

Best Australian property ETF

There are four ETFs available for investors to gain exposure to Australian property: 

  • Vanguard Australian Property Securities Index ETF (VAP)
  • VanEck Australian Property ETF (MVA)
  • BetaShares Martin Currie Real Income Fund (Managed Fund) (RINC)
  • SPDR S&P/ASX 200 Listed Property Fund (SLF)

Size

The Vanguard Australian Property Securities Index ETF (VAP) is the largest Australian property ETF in the Australian market with $2.1 billion in funds under management (FUM). SLF, launched in 2002, is the oldest ETF in the group, and currently has $510 million in FUM. It recently lost the second biggest property ETF title to MVA which has amassed $597 million in FUM while the actively managed RINC has only managed to attain $62 million after launching in 2018. 

Costs and slippage

The Vanguard Australian Property Securities Index ETF (VAP) is the lowest cost in the group charging 0.23% in management fees per year. MVA and SLF are both similar charging 0.35% and 0.40% respectively, while the actively managed RINC charges almost quadruple the cost of VAP, with a fee of 0.85%. The spreads on VAP are the tightest, charging 0.09% whereas RINC’s 0.42% means its total cost of ownership is quite expensive at 1.27%.

ASX CODECOST (MANAGEMENT FEE)BUY/SELL SPREADS (SLIPPAGE)
VAP0.23%0.09%
MVA0.35%0.16%
RINC0.85%0.42%
SLF0.40%0.17%

Liquidity

One of the key advantages of using an ETF to gain exposure to property is the ability to quickly buy and sell your investments. You don’t have to wait weeks or months to finalise a property transaction or settlement, as ETFs trade freely on the share market every business day.

VAP is by far the most liquid Australian property ETF, trading almost $6.4 million in average daily volume. MVA and SLF are about a fifth of the size of VAP, while RINC has less than $200,000 traded daily.

Returns

RINC has outperformed the other property ETFs over the last year with a return of 3.4%, despite the fact that 90% of active fund managers fail to outperform the market index. MVA has performed the best over the last five years due to its concentration in only about a dozen stocks.

ASX CODE1 YEAR TOTAL RETURN3 YEAR TOTAL RETURN (P.A.)5 YEAR TOTAL RETURN (P.A.)
VAP-11.3%-1.9%5.0%
MVA-10.4%-2.8%5.6%
RINC3.4%0.6%N/A*
SLF-12.3%-2.8%4.3%
Source: ASX as of 30 June. *RINC does not have a five year track record as it was launched in February 2018.

Track record

SLF is the oldest ETF in the category, launching in 2002 and tracks the S&P/ASX 200 A-REIT Index. VAP is the second oldest ETF in the category but tracks the broader S&P/ASX 300 A-REIT covering more companies in the Australian share market. MVA tracks an index constructed by a related party of VanEck and is more concentrated, only holding 15 companies.

ASX CODEINDEX TRACKEDINDEX INCEPTIONETF INCEPTION
VAPS&P/ASX 300 A-REIT TRJune 2001October 2010
MVAMVIS Australia A-REITs GR AUDDecember 2012October 2013
RINCN/A*N/A*February 2018
SLFS&P/ASX 200 A-REIT TRJune 2001February 2002
*Active ETF trying to outperform the S&P/ASX 200 Index

Stockspot’s verdict

Since we introduced Stockspot themes in 2016 we’ve given clients the ability to add Australian property as a theme to their Stockspot portfolio and we prefer the Vanguard Australian Property Securities Index ETF (VAP) for this exposure. VAP has the lowest cost, largest size, and is the most liquid ETF in the Australian market. It’s also got a long history, solid returns and broader diversification, which, all combined, makes it our preferred choice. 

Best global property ETF

There are two ETFs available for Australian investors to gain exposure to global property: 

  • SPDR Dow Jones Global Real Estate ESG Fund (DJRE)
  • VanEck Vectors FTSE International Property (Hedged) ETF (REIT)

Size

DJRE had the first-mover advantage, launched on the ASX in November 2013 and currently has $399 million in FUM. REIT, which launched in March 2019, is quickly catching DJRE and now manages $199 million for Australian investors. 

Costs and slippage

REIT has a lower annual management fee of 0.43% compared to DJRE’s 0.50%. Despite REITs slightly higher slippage, its total cost of ownership is pretty similar to REIT. 

ASX CODECOST (Management Fee)BUY/SELL SPREADS (SLIPPAGE)
DJRE0.50%0.15%
REIT0.43%0.25%

Liquidity

REIT has slightly higher trading volumes, averaging over $800,000 daily, after REIT became more popular with investors and closed the gap on trading volume to DJRE which only trades a daily volume of $743,000.

Returns

DJRE has outperformed REIT over the past year. Given its unhedged nature it has benefited from a falling Australian dollar against the U.S. dollar. Despite REIT not having a long-term track record as an ETF, the underlying index returns have been similar between both DJRE and REIT’s strategies. 

ASX CODE1 YEAR TOTAL RETURN3 YEAR TOTAL RETURN (P.A.)5 YEAR TOTAL RETURN (P.A.)
DJRE-5.4%-0.5%3.5%
REIT-11.6%-1.0N/A
Source: ASX as of 30 June 2022. REIT does not have five year track record having launched in 2019.

REIT pays a decent dividend yield of 3.3% per year and does so via quarterly distributions. DJRE is yielding 3.7% per year and pays distributions half-yearly. The hedged nature of REIT provides more consistent and smoother distributions for investors too.

Track record and index

DJRE recently changed its tracking index in February 2022 to be more sustainability focused meaning it weights its companies by their environmental, social and governance (ESG) score. However, the new index which it will now track has a limited track record only launching in April 2021. 

REIT’s underlying index has a longer track record having been launched in 2006. It holds a larger number of companies (more than 338 holdings vs DJRE’s 261 companies) and tracks developed markets (such as the U.S., Europe and Japan) excluding Australia. It provides broad geographical diversification for global exposure. REIT is also hedged in Australian dollars which limits the currency movements against the U.S. dollar. 

In terms of returns, REIT’s underlying index has performed in line with DJRE’s index over the last five years returning 2.0% p.a. and 3.6% p.a. respectively.

ASX CODEINDEX TRACKEDINDEX INCEPTIONETF INCEPTIONIndex 5 year return p.a.
DJREDow Jones Global Select ESG RESI (AUD)*April 2021November 20133.6%
REITFTSE EPRA Nareit Developed ex Australia Rental Index AUD HedgedDecember 2006March 20192.0%
*On 1 February 2022 DJRE changed it’s index from Dow Jones Global Select Real Estate Securities Index

Stockspot’s verdict

Stockspot’s preferred ETF is currently REIT, which is replacing DJRE as our global property theme in 2022. REIT is now three years old and has attracted $200 million of assets. Its lower management fee, broader diversification and increasing trading volumes are attractive reasons for being our preferred global property ETF choice. REIT also pays a decent dividend yield and more frequent distributions which can help investors enhance income in their portfolios. 

Interested in having a diversified portfolio that has exposure to all asset classes including property?

Investment Manager

Marc has previously worked for Morgan Stanley, AMP and KPMG. He holds a Bachelor of Business (Finance/Accounting) from the University of Technology Sydney (UTS), and has completed his Chartered Financial Analyst (CFA) Level 1.

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