REITs vs. direct property: what actually differs

Both give you exposure to property. They behave nothing alike day to day.

REITs trade like shares

A Real Estate Investment Trust owns and manages a portfolio of income-producing property — offices, warehouses, retail units, or housing — and is itself listed on a stock exchange. Because you're buying shares in the trust rather than a slice of a building, you can typically buy or sell within the trading day, the same as any other listed share.

Direct property funds move slower

A direct, or "bricks and mortar", property fund pools investor money to buy physical property outright. Because the underlying assets are actual buildings, the fund manager can't always sell quickly to meet redemptions — which is why these funds sometimes suspend withdrawals during periods of heavy selling, something that has happened across the sector during past downturns.

Why the difference matters

The listed structure means REITs are more liquid, but also more exposed to swings in stock market sentiment — a REIT's share price can fall on general market fear even if the buildings it owns are performing fine. Direct property funds are less reactive to daily sentiment, but that same illiquidity becomes a real constraint exactly when you might most want your money back.

What else to weigh up

REITs are required to distribute the large majority of their rental profits as income, which is part of why they're often held for yield. Direct funds can also produce income, but overall returns in both cases depend heavily on the sector of property held — commercial, residential, logistics and retail have all behaved very differently from one another in recent cycles.