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The US Federal Reserve’s decision to raise interest rates bodes well for Singapore’s real estate investment trust (REIT) market, said KGI Fraser in a report.
It noted that share prices of REITs fell by around 12 percent since June as investors sold their stocks on concerns that REITs will be negatively affected by the rate hike.
“While we acknowledge that certain sub-sectors have seen decline in rents, such as office and hospitality, the selldown has been broad-based across various REITs,” it said.
But after witnessing a steep decline in stock prices “with a more measured pace of expected rate increases, we think that the SREITs and Business Trusts under our coverage looks increasingly attractive.”
The report also noted that “Singapore REITs (-8.1 percent) have underperformed REITs in the US (+1.8 percent), Europe (+22.3 percent) and Hong Kong (+1.1 percent), even after including dividends despite already offering high yields.”
“If the comparison is done in USD, Singapore REITs underperformed more (-14.1 percent). Comparatively, SREITs look increasingly attractive versus overseas REITs.”
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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