Real Estate Investment Trusts (REITs) have become continuously a favorite investment opportunity for Singaporean investors due to its low-interest rate environment. REITs are a lucrative investment opportunity as they provide stable returns and dividend. REITs are very popular, however, will they still continue to give profits in 2017?
For those who never have had an opportunity to invest in REITs, itís never too late to reap the benefits of this lucrative investment opportunity. Since CapitaLand Mall Trust, the first REIT, was listed in 2002, this sector is just about 15 years old. So, if a new investor wants to jump into the wagon, what should he know about REITs?
The REIT can be understood as something between a stock and a bond. REITs are listed on stock exchange, trading is done similar to stock exchange. REITs pay dividends to the investors from the income received from the rentals on its property.
In Singapore REIT industry is popularly called S-REIT, which owns properties in retail, office, residential space, industry, healthcare and hospitality sector. Among these various sectors, where to invest depends on your understanding of the real estate market and economic environment. On average, S-REIT gives 6.7 percent dividend.
Retail: In the coming days, retail REITs could suffer because more and more consumers are buying online and from their hand held devices. Since more retailers are leaving the market, rental income is also likely to fall more.
Office space: Organization, mostly the financial institutions, are downsizing. This has led to cut in demands for office space. Furthermore, there is also a rise in the supply of office space. The REIT market for office looks bleak.
Residential space: A sharp increase in the volume of supply and a sharp decline in the migration rate to Singapore have led to decrease in the demand for residential space.
Industry: High labor cost, a dropping economy and the decline in the manufacturing business have forced the industrial sector in Singapore to cut the demand for business space such as warehouses and business parks.
Healthcare: Currently, Healthcare REITs are stable investment opportunity. The rapidly ageing society has also made healthcare REITs good investment option because it is recession-proof, as the demand for hospitals, nursing homes, and assisted living properties are always on rise.
Hospitality: After Healthcare REITs, hospitality REIT is another lucrative market in REIT. Hospitality industry is based on the tourist arrival. Since there was a good influx of tourists in 2016, it is expected that it will continue to rise in 2017. This will lead to more benefits for Hospitality REIT.
New to REITs: Consider These Profitable REIT Markets
If you are new to the S-REIT market, you might be unable to decide where to invest. While selecting a REIT to invest, one has to consider various factors, which may range from quality of REIT assets to price-to-book ratio, expected return, track record of REIT management team etc. You can either spend a lot of time learning the REIT market or follow the trend in the market.
Keppel DC REIT: Keppel DC REIT is relatively new company. It was listed on the Singapore Exchange in 2014. It invests primarily for the real estate focused on data center. It owns 10 high quality data centers in six Asian and European countries. It has grown by 25 percent in the last two years.
Mapletree Commercial Trust: Mapletree Commercial Trust (MCT) invests in real estate used for both office and retail purposes. MCT is owned by Mapletree Investments Pvt. Ltd. It has properties in five different locations in Singapore. MCT has a shopping mall, which is the largest in Singapore, office blocks and business park. It provides 6 percent dividends.
First REIT: Singapore is first healthcare real estate investment trust, First REIT has healthcare-related real-estate. Return on the investments from First REIT is between 6.5 percent to 46.1 percent compared to the latter 22.8 percent based on various properties.
If you are thinking on investing on REITs, you should always analyse the market and invest only on the properties that are giving high yields.