REITs present a 'long-term buying opportunity' despite inflation pressures

Further share price volatility ahead

Real estate investment trusts have failed to provide the inflation protection that markets expected this year as rising rates continue to put pressure on returns. However, analysts are still seeing a buying opportunity for long-term investors.

From a share price perspective, the real estate sector has been a laggard year-to-date, as bearish investors moved away from riskier assets such as REITs amid rising interest rates and a worsening economic backdrop. Although the real estate market, as represented by the FTSE EPRA/Nareit Global Real Estate index, rebounded in July with a return of 6.7%, the index has lost 19.2% year-to-date as of 31 August, according to Nareit. REITs have historically provided natural protection against inflation as real estate rents and values tend to increase when prices rise, but this has not happen...