Real Estate Investment Trusts (REITs): A Guide for International Investors

Real estate investment trusts — companies that own income-producing real estate and distribute the majority of their profits as dividends — offer private investors a way to gain exposure to property markets without the capital concentration, illiquidity, and management demands of direct ownership. Listed REITs trade on stock exchanges like ordinary shares, can be bought and sold in minutes, and are available in markets across the globe.

For internationally mobile investors and expats, REITs are particularly useful: they provide sterling, dollar, euro, or other currency-denominated property income without the need to own physical property in a country where you may not live permanently.

What a REIT Is

A REIT is a tax-advantaged corporate structure specifically designed for property investment. In the UK, the REIT regime has operated since 2007. The key features of a UK REIT are:

• At least 75% of its assets must be investment property
• At least 75% of its profits must come from property rental
• It must distribute at least 90% of its tax-exempt rental profits to shareholders annually as a "property income distribution" (PID)
• It pays no corporation tax on qualifying rental profits

The requirement to distribute 90% of profits means REITs typically offer relatively high dividend yields compared with general equities. In exchange for this distribution obligation, shareholders pay income tax on PIDs — even when held inside a standard investment account.

Similar regimes exist in the US (REITs since 1960), Australia (ASX-listed property trusts), France (SIICs), Germany (G-REITs), Japan (J-REITs), Singapore (S-REITs), and numerous other markets. The specifics of each regime differ, but the underlying concept — tax-transparent property ownership that distributes income — is consistent.

Types of REIT

Diversified REITs own a mix of property types and locations, providing broad real estate exposure in a single investment.

Sector-specific REITs focus on one asset class:

• Industrial and logistics — warehouses, distribution centres (e.g. SEGRO, Tritax Big Box in the UK)
• Retail — shopping centres, retail parks, supermarket-anchored assets
• Office — city centre or business park offices
• Residential — build-to-rent blocks or social housing
• Healthcare — GP surgeries, care homes, hospitals
• Student accommodation — purpose-built student housing
• Data centres — a growing sub-sector globally
• Self-storage — growing segment in the UK

Geographic REITs focus on specific regions or countries, including emerging markets.

Mortgage REITs (mREITs) — common in the US — invest in mortgages and mortgage-backed securities rather than direct property. Their risk profile is fundamentally different from equity REITs; they are more sensitive to interest rate movements and are not discussed further here.

UK-Listed REITs for International Investors

The UK REIT sector offers a range of well-established vehicles. Notable examples across different sectors include:

• SEGRO (industrial/logistics)
• Land Securities, British Land (diversified office and retail)
• Primary Health Properties, Assura (healthcare)
• Grainger (residential build-to-rent)
• Unite Group (student accommodation)

UK REITs can be purchased through a stockbroker, online platform, or discretionary investment manager. Shares are denominated in sterling.

Tax treatment for non-UK investors: The UK does not levy withholding tax on PIDs paid to non-resident shareholders under domestic law (though treaty provisions may apply in some jurisdictions). However, the receiving country may tax the income under its domestic rules, often with a credit for any UK tax paid. Check the applicable double taxation agreement.

Global REIT Markets

United States remains the world's largest REIT market by market capitalisation, with over 200 publicly traded REITs covering every property sector imaginable. US REITs are generally subject to US withholding tax on dividends (30% headline rate, reduced under treaty for many countries).

Singapore has built one of the world's strongest REIT markets, with S-REITs covering Singapore, regional Asia, and global assets. S-REITs are popular with regional investors for their transparency and governance standards.

Japan has a large J-REIT market offering exposure to Tokyo offices, logistics, residential, and retail, with dividend withholding tax applicable to foreign investors.

Australia — A-REITs (or listed property trusts) remain the primary vehicle for Australian real estate exposure and are among the oldest property investment structures globally.

REITs vs Direct Property: Key Comparisons

Feature	REITs	Direct Property
Liquidity	High (exchange-traded)	Low (months to sell)
Diversification	High (many assets)	Low (concentrated in one or few assets)
Management	None required	Significant (or agent costs)
Entry cost	Low (from £100+)	High (£100,000+)
Leverage	Built into REIT structure	Investor's choice
Income	Regular dividends (90%+ of profits)	Net rental income
Capital growth	Share price movements	Property market movements
Tax	Income tax on PIDs; CGT on shares	Income tax on rent; CGT on sale

REITs do not replicate direct property in all respects. As company shares, they are correlated with equity markets in the short term — during market sell-offs, REIT prices tend to fall even if underlying property values are unchanged. Over longer periods, performance tends to track underlying property fundamentals more closely.

REIT Income and Tax Efficiency

For UK-resident investors, PIDs from UK REITs are treated as property income and do not benefit from the dividend allowance. They are taxable at income tax rates (20%, 40%, or 45%), not at dividend tax rates (8.75%, 33.75%, or 39.35%). Ordinary dividends from REITs (the non-PID portion) are taxed as normal dividends.

For non-UK residents, the position depends on the applicable double taxation agreement between the UK and the country of residence. Many treaties allow the UK to tax PIDs at source, with a credit available in the country of residence.

Within a UK ISA, UK REITs can be held, and PIDs are exempt from UK income tax (ISAs are not available to non-UK residents for new subscriptions). Within a SIPP, PIDs are exempt from immediate UK income tax.

REITs in a Portfolio Context

REITs are typically included in an investment portfolio as part of an alternative or real assets allocation. Their income characteristics — high, relatively stable dividend yields — make them useful as an income-generating component alongside bonds and dividend-paying equities.

Studies of long-term global equity returns suggest that listed real estate (REITs) has delivered returns broadly comparable with or slightly below equities, with higher income yields offset by somewhat lower capital growth. Like all asset classes, past performance is not a reliable guide to future returns and capital values can fall.

Access for International Investors

International investors can access REITs through:

• Direct purchase via an international stockbroker with access to UK, US, or Asian exchanges
• Actively managed property funds that hold a mix of direct property and listed REITs
• Passive REIT index funds or ETFs (multiple providers offer global REIT ETFs in USD, GBP, and EUR)
• Offshore investment bonds, where REIT funds can be held in a tax-deferred wrapper

The choice of access route affects the tax efficiency of the income — particularly relevant for higher-rate taxpayers and those in countries with complex rules on foreign-source investment income.

How Global Investments Can Help

Global Investments regularly incorporates real estate exposure — through both direct property and listed REITs — into international clients' portfolios. Our investment team can advise on appropriate REIT sector and geographic allocation, the most tax-efficient access route for your specific residency position, and how property income integrates with your broader income strategy. For clients who currently hold direct UK property and are considering whether a REIT or fund allocation offers a more efficient alternative, we can model both approaches. Contact us for a confidential initial conversation.