It’s hard enough already for first-time homeowners to buy their own home, with prices in most of the western world well into bubble territory (with New Zealand at the top of some lists).

Buying up the US real estate market

Recently, however, institutional investors have been buying up residential properties because their yields (typically in low single digits these days) are well above those of normal assets like government stocks, thanks to insanely low-interest rates.

Typically, the US is leading the charge with trillion-dollar asset managers like Blackrock gobbling up US real estate. A sister company, Blackstone – America’s largest landlord but also the world’s largest real estate company with a US$325bn portfolio – has agreed to buy single-family rental company Home Partners of America for $6bn. Home Partners owns more than 17,000 houses in the US, which it rents out.

The benefits of investing in rentals

Single-family rentals have been a favourite institutional bet over the past year, as real estate investors have sought new places to invest during a pandemic that kept people away from offices, hotels and malls. The result, as the Wall Street Journal reports, has been a frenzy among 200 companies and investment firms who have entered the house hunt. These include computer-assisted investor Opendoor Technologies; money managers, including JP Morgan and BlackRock; platforms such as Fundrise and Roofstock that buy and arrange for the management of rentals on behalf of individuals; and builder LGI Home, which now reports wholesale home sales to bulk buyers in its quarterly results.

At the same time, remote work and schooling created strong demand for suburban homes by buyers and renters alike, pushing prices up and inventory down.

This seems to be another unintended consequence of expansionary monetary policy. In the current economic climate, investing in quality shares in high-performing companies is, even more than usual, a smart investment decision.


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