Global property investment is very much like love - a many splendoured thing. But, like affairs of the heart, investors should look very carefully before they leap.

Why are global listed property trusts and Real Estate Investment Trusts (REITS) - so hot at the moment?

Three main factors are responsible.

First, there a double-sided demographic development across the globe which will drive global property into the foreseeable future.

In the wealthier economies, the ageing of the population is producing a massive rise in savings seeking a safe and profitable home.

At the same time, the populations of the developing economies in Asia, Africa and the Middle East are becoming younger and younger, with many such economies already having at least 50 per cent of their citizens under 25.

As a result, the demand for housing, shopping centres and offices in these economies is expected to skyrocket, creating a welcome outlet for the surplus savings of the citizens of the wealthier ones.

Secondly, there is the drive for diversification.

Globalisation has increased the degree of correlation between the major equities markets and has thus reduced somewhat the benefits of offshore investing in them.

But global property markets are much more performance diverse.

Lastly, the supply of property opportunities in the smaller advanced economies is not keeping up with the growth in demand for them.

For example, according to Jones Lang LaSalle (JLL) estimates, our cash rich property funds invested around $US12 billion overseas last year, with about half in Europe, one quarter in Asia and one-third in the US.

Is there really such a thing as "global property" - or does the term hide the enormous variety of investment opportunities within this asset class?

Certainly, the very sharp growth in size and complexity of global property investment vehicles in recent years has made it much harder to pick winners.

For example, even "US" funds may not be what they seem. Property investments by them in Mexico, for example, have a very different risk profile than at-home investments. Similarly, many "Australian" property trusts have large overseas assets.

Increases in merger and acquisition activity will also have a great effect on this asset class's absolute and relative performance.

Property trusts are also going through a radical structural change.

Far from just a straight yield play, they are merging with developers and indulging in far more sophisticated financial engineering, such as hedging the asset value of their offshore investments against currency risk.

This means that even returns in a particular economy are becoming much more difficult to predict. For example, the "fundamentals may look fine but an unexpected currency move could harm investors in a fund.

Moreover, the thirteen major countries with REITs use several different accounting methods to measure their financial performance. The respective tax treatment across countries also differs markedly.

Is the risk/return trade-off much easier to calculate with global property?

Note in the accompanying graphs that there is no simple trade-off between return and volatility. South Africa shows this very clearly,

Australia's average Beta is 0.55, meaning that if the All Ordinaries Index moved by 1 per cent, then the listed property market would move by just over half a percentage point - at least in theory.

But our Beta has risen in recent years, with the result that our listed property trusts have become much more similar to equities in terms of their risk/return profile.

This is another argument for Australian investors to move funds into global property, if they seek not only diversification but different risk profiles to the ASX.

What is likely to happen to REITs in the next five years? This year will see their establishment in the UK and Germany.

The biggest question though is whether China and India will go down this path? Given China's greater openness to the world, she is likely to lead her neighbour.

Other countries to watch include Malaysia (which has set up the first Islamic REIT) and South Korea. They both have very low (or negative) premiums to net assets, making them two countries where significant opportunities exist in terms of potential for growth in capital invested.

In short, global property is booming but its very newness and diversity means that investors will find it increasingly difficult to pick winners - even by just countries, let alone individual trusts.

For much more detail on the complexity of REIT investment see the Ernst and Young Global REIT Report 2006 at www.ey.com

Dr David Clark taught Business Economics at the University of NSW for 35 years, was an AFR and Personal Investor columnist for over a decade, and is now an investor educator. The views expressed in this article are Dr Clark's not necessarily Vanguard's.