Samsung Asset Management's Korea-US-Japan Separate Taxation Real Estate ETF Series Surpasses 60 Billion Won

Samsung Asset Management announced on the 25th that the net assets of three real estate REIT exchange-traded funds (ETFs)?KODEX Korean Real Estate REIT Infrastructure, U.S. Real Estate REIT (H), and Japan Real Estate REIT (H)?have approximately doubled compared to last year, reaching 63.2 billion KRW.

In the case of KODEX Korean Real Estate REIT Infrastructure, which was listed last March, net purchases by individual investors exceeded 20 billion KRW within about seven weeks of listing, driven by strong investor response.

Not only in Korea but also U.S. and Japan real estate REIT ETFs have emerged as monthly dividend products, establishing themselves as new investment alternatives for investors seeking monthly dividend income.

Although the Korean, U.S., and Japan real estate REIT ETFs all include real estate REIT companies, each country has unique characteristics. In Korea and Japan, the REITs consist mainly of A-grade prime offices centered in Seoul and Tokyo. These REITs tend to assign high value to well-located real estate assets, showing relative resilience to interest rates. On the other hand, in the U.S., due to the large land area, the importance of location is less emphasized, and the efficiency of financial procurement costs for the REITs is more critical.

Due to these differing characteristics, in the current high interest rate environment, Japanese and Korean real estate REITs are showing relatively strong performance, while in a declining interest rate environment, U.S. REITs are expected to perform better.

Currently, the Korean, U.S., and Japan real estate ETF series show different dividend yields. KODEX Korean Real Estate REIT Infrastructure offers an annual yield of about 7%, KODEX U.S. Real Estate REIT (H) about 4% annually, and KODEX Japan Real Estate REIT (H), including the currency premium, about 8% annual dividend yield.

Samsung Asset Management’s three real estate REIT products benefit from a tax advantage as dividends are subject to a separate taxation rate of 9.9% under government policy. While dividends from regular stocks are subject to comprehensive taxation at 15.4%, which burdens investors, these products offer a 9.9% separate taxation benefit on dividend income up to a maximum investment of 50 million KRW.

As many investors seek to create a second cash flow through monthly dividends, interest in dividends is increasing. While stock dividends have the disadvantage of being heavily influenced by corporate performance, real estate REITs have the advantage of relatively stable and consistent dividend payments because rental income from buildings is the main source. Accordingly, buying demand from long-term monthly dividend installment investors aiming to create steady cash flow is expected to expand further.

Ma Seung-hyun, a manager at Samsung Asset Management, said, “Interest from investors who want to enjoy a stable monthly cash flow and the benefit of separate taxation on dividend income will continue,” adding, “In the future, when interest rates decline, capital gains from the increase in asset value of REIT stocks can also be targeted.”