What Is Listed Property?

‍Is this type of property investment right for you?

For good reason, property investment remains a favourite type of investment for many Kiwis.

The term listed property commonly refers to a type of property investment that could be a welcome addition to the investment portfolio of many New Zealanders.

Background – REITs and Listed Property

A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. A REIT is a type of managed fund, as REITs pool the funds of numerous investors to buy underlying assets, in this case, real estate.

In New Zealand, the term listed property commonly refers to REITs listed on the New Zealand Stock Exchange (NZX). That means everyone can buy a little piece of them to own a slice of the real estate that those companies hold. Listed REITs are professionally managed, publicly traded companies that manage their businesses with the goal of maximising shareholder value.

Note: to avoid confusion, in some countries the term ‘listed property’ can refer to a certain type of business asset for tax purposes. That is not the focus of the description on this page.

Traditional Kiwi Property Investors

When most Kiwi’s think of a property investment, we think of a “mum and dad” investor buying a residential property or two. This could be a house or unit, or maybe a block of flats or apartment. This type of investment has been a Kiwi favourite for many years, because directly investing in property comes with many advantages, including:

• Improvements can be made to increase the property’s value. This especially suits DIY’ers and tradespeople.
• The landlord can directly control the property.
• Unlike most investments, property can be simply leveraged for maximum return. This means borrowing to invest, including ‘unlocking’ the unused equity in a family home. This can markedly increase the potential return on investment.
• For many people, it feels good to see and touch a physical investment – as opposed to owning shares in a company traded on the stock exchange which may not feel as “real”.
• Rental income.
• Favourable tax rules – though these have been degraded in New Zealand over recent years.

Of course, all investments have disadvantages too. When directly investing in residential property, disadvantages can be:

• A large initial sum is usually required.
• Lack of diversification.
• It can be hard and costly to sell.
• Tenancy trouble.
• Time to find investments and manage them, or the cost to pay someone to do this.
• Unforeseen costs, perhaps due to maintenance or, at worst, an earthquake or other disaster.
• Leverage increases the risk more than most people might realise. If it really comes down to it, the bank can sell the property for less than the sum owing on the mortgage, then come after the property owner for the shortfall. Leverage also increases the risks related to interest rates – if interest rates lift substantially, the property’s appeal as an investment dramatically reduces as cash flow problems arise.
• Over recent years, tax changes, tenancy law changes which firmly favour tenants, and several other laws and regulations have made life as a landlord more challenging.

For those in a strong financial position, traditional property investment as described above, can still be a great investment as part of a well-diversified portfolio That said, listed property can be a great investment too, and can offset some of the disadvantages above.

Learn more: Is property investment still worth it?

How Is Listed Property Different?

In New Zealand, the REITs available invest almost entirely in commercial property, such as:

• Industrial – distribution hubs, factories and warehouses
• Offices – buildings that house corporate and government offices
• Retail – shopping malls and large format retail stores

Most REITs focus on a particular type of commercial property, though some hold multiple types of properties in their portfolios.

REITs vs Property Syndicates in New Zealand

A REIT is not a property syndicate.

While both REITs and property syndicates give investors access to commercial property, they differ significantly in structure and risk. REITs are listed on the NZX, professionally managed, and offer daily liquidity — allowing investors to buy or sell units like any other share. They also typically hold a diversified portfolio of properties, spreading risk across sectors and tenants.

In contrast, property syndicates are usually unlisted, commonly focus on a single asset, and often have fixed terms of five to seven years. They’re less regulated, with disclosure and governance standards varying between providers. Exiting early (selling up) can be difficult, and investor returns are closely tied to the performance of one property and its tenants.

While many syndicates perform as intended, several recent high-profile failures have highlighted their risks. In these cases, there have been issues including overvaluation, underinsurance, and in select instances allegations of fraud. These have led to significant property syndicate investor losses.

Listed Property Has Advantages and Disadvantages Too

Circling back to listed property, let’s explore the advantages and disadvantages of it.

All investments come with pros and cons, and listed property is no different.

Benefits of Listed Property:

• Liquidity (ease of buying and selling). Shares in listed property trusts can be bought and sold with relative ease on the stock exchange, offering greater liquidity compared to direct property investments.​The ability to own real estate and earn dividend income from real estate investments without having to directly buy or finance any property purchases themselves.
• The ability to own real estate that might usually be out of an investors reach, including offices, health facilities, or industrial buildings. These sorts of buildings are huge, and expensive too! Most ‘mum and dad’ investors could never afford one on their own, and even if they could, it would make little sense to invest so much in a single asset.
• Diversification. Investors gain exposure to a diversified portfolio of properties across various sectors, reducing risk.
• The market instantly reflects any increase in share value.
• Professional management.
• Affordability – there’s usually no minimum investment which means a broader range of investors can participate. For a small-scale investor this could be as easy as investing into listed property via a share trading app.
• Tax efficiency.
• Rental income paid as dividends. These can be attractive, as a significant portion of income is distributed to shareholders.
• Listed property is typically well-regulated and transparent. This compares favourably with the likes of property syndicates or other arrangements.

Risks and Drawbacks Associated with Listed Property:

• Volatility. Share prices can be affected by market fluctuations, which may not reflect the actual value of the underlying properties. This can unsettle some investors.
• Usual property risks. The REIT itself must manage risks including those regarding leverage, the possibility of natural disasters impacting the properties, and sensitivity to changes in interest rates.​
• Investors give control of operational decisions to the REIT. Much of the performance of the investment depends on the expertise of the management team.
• Some REITs can have high management and transaction fees, leading to lower payouts for investors.
• The extra regulatory expenses to ensure the REIT complies with regulations and laws regarding publicly traded companies.

How Might Listed Property REITS Perform?

The return REITs generate is split between:

• Capital gains, and
• Tenants paying rent. Most often, a portion of this is paid regularly as a dividend.

Tips for Investing in Listed Property

If you’re considering making the leap to invest in listed property, here are a few areas to consider before you get started.

Understand the Types of Properties You Are Investing In

Most REITs specialise in a certain sector which should be easy to find in the fund summary. Understand the risks of each sector. More than ever, the current environment highlights the need to be selective when investing in listed property securities. This is because different sectors of the real estate market have been impacted to different degrees in the post-Covid world. For instance, there are a lot more people working remotely, which has put pressure on many mid- and low-grade office spaces. These offices now often struggle for tenants, while usually the high-end office spaces have remained in demand. Another area that has seen rapid change is retail, in broad terms many small retail premises (shop fronts, for instance), have seen decreased demand as more of us have taken to online shopping. In some parts of the country, hospitality – including cafes and bars – have struggled, and so on. Alternatively, other sectors are more in demand than ever: supermarkets, healthcare, and logistics hubs (perhaps to ship all our online shopping!)

Are There Opportunities?

The current economic situation has caused some REIT investors to panic and sell - causing a fall in REIT price on different stock exchanges. This can create buying opportunities for wise long-term investors.

Look At the Numbers

It is important to see if dividends are being paid from operations or if the fund is being forced to use additional capital. A well-run REIT should rely on its operations to pay for expenses and dividends. Also, be wary of large, one-time real estate sales that might skew the financials upwards. Some financials are being revised as the values of properties are re-evaluated and higher vacancy rates are included in the rental forecasts.

Know Your Investor Risk Profile and Time Horizon

Investing is usually a long-term game, and listed property is no different. The ‘usual’ tips regarding diversification and not taking any more risk than you can handle apply here too.

Related material:

• ‍When to become a property investor, the checklist
• Stocks versus real estate
• Is property investment still worth it?

How Can You Invest in Listed Property?

Chances are you already own some listed property as part of your existing investments, perhaps within a KiwiSaver Scheme – most fund choices dedicate a fraction to listed property.

• International REITs can be a great diversifier. A huge number are available across the globe, investing in a wide range of property and infrastructure assets to suit any investor.
• All ten of the largest REITs are based in the United States.

There are eight major REITs listed on the New Zealand stock exchange, and they probably own properties that you visit on a regular basis! You can buy them just like any other public stock on the New Zealand market, here are three examples:

• Industrial: Goodman Property Trust is a major player in the industrial property space, with a strong portfolio of logistics and warehouse facilities, particularly in high-demand areas like Auckland’s industrial precincts. One of its flagship assets includes the Highbrook Business Park in East Tāmaki.
• Office: Precinct Properties focuses heavily on premium office spaces. Notable assets include Auckland’s Commercial Bay development, which integrates office towers with retail and dining, and Wellington’s Bowen Campus, home to several government agencies.
• Retail: Stride Property Group has significant holdings in retail, including ownership of centres like NorthWest Shopping Centre in West Auckland. These assets provide exposure to consumer foot traffic and long-term lease agreements with national and international retailers.

Or, you might consider investing in a property-focused managed fund, active and passive funds are now available in tax-efficient New Zealand-based arrangements.

To explore whether an investment into listed property might meet your needs, get in touch with our team to book your complimentary initial consultation.