Why International Real Estate is More Appealing Right Now: A Comparison of VNQ vs VNQI
Introduction
When it comes to investing in real estate, many investors look to the United States as a safe bet. U.S. REITs have historically outperformed their global counterparts, thanks to factors such as valuation multiple expansion, a stronger dollar, and higher real GDP growth. However, recent trends suggest that international real estate may be becoming more appealing, particularly when comparing VNQ (Vanguard Real Estate ETF) to VNQI (Vanguard Global ex-U.S. Real Estate ETF).
U.S. REITs vs Global REITs
U.S. REITs have enjoyed strong performance in recent years, benefiting from robust real GDP growth driven by population increases and productivity gains. This has resulted in higher valuations and returns for U.S. REITs compared to their global counterparts. On the other hand, international REITs have faced challenges such as weaker growth and demographic issues in certain regions, leading to lower valuation multiples.
VNQ vs VNQI
When comparing VNQ to VNQI, it’s evident that there is a discrepancy in valuation multiples. Despite offering a comparable return on equity, VNQI trades at significantly lower valuation multiples than VNQ. This suggests that international real estate may be undervalued compared to U.S. real estate, presenting an attractive opportunity for investors looking to diversify their portfolio.
Effect on Investors
For individual investors, this shift in the landscape of real estate investing could mean the opportunity to benefit from potential undervaluation in international markets. By including VNQI in their portfolio alongside VNQ, investors can diversify their real estate holdings and potentially achieve higher returns in the long run.
Effect on the World
On a global scale, the growing appeal of international real estate could have implications for economic development and investment opportunities in various regions. As investors increasingly look beyond U.S. borders for real estate investments, this could spur growth and development in international markets, contributing to a more interconnected and dynamic global economy.
Conclusion
In conclusion, the comparison of VNQ vs VNQI highlights the increasing appeal of international real estate compared to U.S. real estate. With potential undervaluation in international markets and the opportunity for diversification, investors have the chance to capitalize on this shifting trend in real estate investing. By considering a balanced approach that includes both U.S. and international real estate investments, investors can position themselves for success in a changing global market.
