J-REITs Show Signs Of Overheating

July 27, 2005
REIT Funds Show Signs Of Overheating

TOKYO (Nikkei)--Prices have spiked for such popular investment vehicles as mutual funds with stakes in real estate investment trusts, and the market is exhibiting signs of overheating.
The balance of assets managed in REIT funds, which debuted in 2003, surpassed 1 trillion yen in July. Investors have been drawn to the high returns of such funds. Some 300 billion yen of the total is invested in domestic REITs, representing more than 10% of their market capitalizations.
The Tokyo Stock Exchange's REIT index was at the 1,400 level at the beginning of the year, but has marked record highs since March. At one point this month, the index rose to nearly 1,700.
"The inflow of retail-segment funds via investment trusts is buoying the REIT market," according to Takashi Ishizawa, chief real estate analyst at Mizuho Securities Co.
But with returns falling to the lower half of the 3% range, Ishizawa says that the upside is limited.

(The Nihon Keizai Shimbun Wednesday morning edition