Someone once asked me what the best financial investment is. While this is a fairly subjective question, I answered real estate, and I think many others would as well. Countless fortunes have been derived from land ownership and real estate investing.  Over the past four years, investors have finally re-discovered real estate as an advantage class. In fact, real estate should play a role in every long-term advantage planning strategy.

The reason for the current success of real estate investments can be summed up in two words: strong performance.

Anyone who thinks that real estate funds are solely the preserve of institutional investors, particularly pension funds, could hardly be more wrong. True, these parties continue to provide the lion’s share of the capital Of course; the return has to be right for all these private clients. But for many of them, participation in real estate has an emotional element above and beyond the purely financial. People like to know how their money is invested, and they identify with real estate funds and real estate companies accordingly. Without doubt, the number of such investors will rise in the future. Which is why, I am convinced of the success of this idea.

Good reasons to invest in real estate.
We are still convinced that real estate - whether as direct investments or indirectly (i.e. through securities) - should play a role in every long-term gain allocation strategy. We base our case on the positive total return and on several additional arguments as well:

Uneven performance.
Since 2001, the performance of real estate companies has varied to a greater extent than that of funds. Real Estate has increased in value since early 2003 by more than 40 percent.

It's still a discount.
When talking about real estate stocks, the terms used are premiums and discounts. A discount is the amount by which net property exceed the trading price.

Concerns proved to be unfounded.
Since their launch in 2000, the big real estate investment companies have generally been trading at a discount of roughly 20 percent. The stock companies' large investment in commercial space, their higher levels of borrowing, the low volumes of stocks traded and the lower distributions were some of the reasons cited to explain why funds and stocks performed differently. But over the past four years, real estate investment companies have shown that many of these concerns proved to be unfounded, and the discounts of the big investment companies have fallen accordingly over the past two years.

Outlook trending positive.
Since 2000, real estate as a benefit class has seen significant capital inflows. We expect this trend to continue in 2008 as well. In addition to short-term, cyclical forces, long-term developments such as the following have a key impact in this regard: increased demand on the part of institutional investors for greater stability in terms of income and value, ongoing trend with large-scale investors to include real estate as an asset allocation component, growing diversity of available products, and substantially increased market transparency.

Conclusion.

What distinguishes an investment in real estate from an investment in the stock market is that you own a real, tangible item. Maybe you didn’t buy a house or five acres of land, but you have investment in a real estate company, either way you’re a winner. Having real estate is a real and tangible advantage. The benefit here is that unlike stock (not that I do not support this kind of investment), real estate usually appreciates in value. That indeed is the forecast for 2008.