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Real Estate Investment Trusts (REITs) is a popular type of investment in Singapore. In fact, it is so popular that Singapore has grown to become the largest REIT market in Asia ex-Japan with a market capitalisation of $111 billion. While there are many REITs with both local and overseas property portfolio, many REITs with purely overseas properties have also chosen to list on the Singapore Exchange (SGX).
Investors in Singapore are mainly drawn to REIT investments for two reasons.
#1 REITs are essentially property investments.
Singapore investors’ desire of investing in properties stems from its meteoric rise since our island nation gained independence. Till today, property prices are continuing to tick upwards despite Singapore having just faced the deepest recession in our history in 2020.
On top of this, the property market has also had to navigate numerous property cooling measures enforced over the years to reduce speculation in residential properties.
As sky-high prices mean that property investments remain out of reach for many ordinary Singaporeans, REITs come into play– allowing ordinary investors to access property investments in smaller investment amounts. REITs also enable local investors to gain exposure to properties both in Singapore and other major property markets globally.
#2 REITs offer relatively high dividends.
As an asset class, REITs are mandated to pay out 90% of its earnings as distributions to its unitholders. This is the reason why many REITs have a relatively high distribution yield – currently paying an average of 5.9% per annum. Such distributions provide passive income for investors, who can choose to reinvest their distributions or to supplement their income.
However, we need to understand that REITs are able to pay out a high distribution yield to its unitholders largely because it is highly leveraged.
What you’ll find out in this article:
- You First Need A CDP Account
- What Are REITs?
- 7 Types Of REITs Listed In Singapore
- How To Start Investing In REITs?
- What Are REIT ETFs?
- Investing In A Managed REIT Portfolio
- Pros And Cons To Investing In REITs VS Properties
- Important Questions We Should Ask When We Decide To Invest In REITs
Firstly, You Need A Brokerage & CDP Account
Similar to all investments made on the Singapore Exchange (SGX), you need to open a stock brokerage and Central Depository (CDP) account before you are able to access the market. To open a brokerage account, you can go to the individual websites of brokerage firms to apply.
If this is the first time you are signing up for a brokerage account, your broker of choice can help in submitting the CDP application form on your behalf, to CDP. This saves you the hassle of having to apply on your own.
With CDP account opening available online, you can also sign up for an CDP Account from the comfort of your home, or by downloading and completing the CDP application form. More information can be found on the SGX website.
Once you have submitted the CDP application form and all supporting documents, your CDP application is completed. CDP will notify you with your necessary login information oncer your application submission is processed.
With the hygiene part of the process settled, you can now start investing in REITs.
Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore
What Are REITs?
REITs are listed on the SGX, and can be bought and sold in a similar way to regular stocks.
REITs pool funds from many investors to purchase a large portfolio of properties. These properties are then leased out to collect rents, which are paid to REIT investors in the form of quarterly or semi-annual distributions.
REITs allow investors to get exposure to large and diversified property investments in Singapore and globally with a small investment sum. REITs also take care of the professional property management services to manage the properties, enhancing its portfolio and maximise rents. This takes away the daily operational stresses of managing a property that we own individually.
For a company to be classified as a REIT in Singapore, it has to meet strict regulatory guidelines including paying out more than 90% of its income, maintaining a gearing of less than 45%, limiting development activities to a maximum of 25% of its portfolio amongst others.
7 Types of REITs Listed In Singapore
Most REITs specialise in specific real estate segments – even though there is a current trend of consolidation to form larger REIT entities. There are currently about 42 REITs and property trusts in Singapore, and they typically invest in these seven REIT types:
Read Also: 7 Types of REITS In Singapore, And The Reasons Why People Invest In Them
| 1. Commercial/Office REITs | |||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 1 | Elite Commercial REIT | United Kingdom | 7.6% |
| 2 | IREIT Global | Germany | 7.0% |
| 3 | Keppel Pacific Oak US REIT | USA | 8.4% |
| 4 | Keppel REIT | Singapore; Australia; South Korea | 5.6% |
| 5 | Manulife US REIT | USA | 7.3% |
| 6 | Prime US REIT | USA | 8.3% |
| 2. Retail REITs | |||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 7 | BHG Retail REIT | China | 3.8% |
| 8 | Dasin Retail Trust | China | 11.4% |
| 9 | Frasers Centrepoint Trust | Singapore; Malaysia | 4.5% |
| 10 | Lippo Malls Indonesia Retail Trust | Indonesia | 4.7% |
| 11 | Sasseur REIT | China | 7.7% |
| 12 | SPH REIT | Singapore | 4.8% |
| 13 | Starhill Global REIT | Singapore; Malaysia; Australia; China; Japan | 6.6% |
| 14 | United Hampshire US REIT | USA | 8.5% |
| 3. Industrial REITs | |||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 15 | AIMS APAC REIT | Singapore; Australia | 5.9% |
| 16 | ARA Logos Logistics Trust | Singapore; Australia | 6.0% |
| 17 | Ascendas REIT | Singapore; Australia; China; UK | 5.0% |
| 18 | EC World REIT | China | 7.3% |
| 19 | ESR-REIT | Singapore | 6.4% |
| 20 | Mapletree Industrial Trust | Singapore; USA | 4.5% |
| 21 | Mapletree Logistics Trust | Singapore; Australia; Malaysia; Hong Kong; Japan; Japan; China; South Korea; Vietnam | 4.2% |
| 22 | Sabana REIT | Singapore | 8.4% |
| 4. Hospitality REITs | |||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 23 | ARA US Hospitality Trust | USA | N.A. |
| 24 | Ascott Residence Trust | Singapore; Australia; Malaysia; Japan; China; Indonesia; Vietnam; Philippines; France; Germany; Spain; Belgium; UK; US | 4.0% |
| 25 | CDL Hospitality Trust | Singapore; Australia; Japan; UK; Maldives; New Zealand | 4.0% |
| 26 | Far East Hospitality Trust | Singapore | 4.2% |
| 27 | Frasers Hospitality Trust | Singapore; Australia; Japan; UK; Germany | 2.5% |
| 5. Healthcare REITs | |||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 28 | First REIT | Singapore; Indonesia; South Korea | 11.7% |
| 29 | Parkway Life REIT | Singapore; Malaysia; Japan | 2.9% |
6. Diversified & Specialised |
|||
| No | REITs And Stapled Securities | Country Exposure | Distribution Yield* |
| 30 | Ascendas India Trust | India
(tech parks + warehouses) |
5.8% |
| 31 | CapitaLand Integrated Commercial Trust | Singapore, China, Malaysia (Retail + Commercial/office) |
5.3% |
| 32 | CapitaLand China Trust | Hong Kong; China (retail and business parks) |
5.8% |
| 33 | Cromwell European REIT | Denmark, France, Germany, Italy, the Netherlands and Poland
(commercial/office + industrial) |
7.0% |
| 34 | Frasers Logistics & Commercial Trust | Australia; Germany; Singapore; Netherlands; UK
(commercial/office + industrial) |
5.0% |
| 35 | Keppel DC REIT | Singapore; Australia; Malaysia; UK; Germany; Netherlands; Italy; Ireland (Data Centre) |
3.9% |
| 36 | Lendlease Global Commercial Trust | Singapore; Italy (Retail + Commercial/office) |
5.3% |
| 37 | Mapletree Commercial Trust | Singapore (Retail + Commercial/office) |
4.7% |
| 38 | Mapletree North Asia Commercial Trust | Hong Kong; China; Japan (Retail + Commercial/office) |
6.2% |
| 39 | OUE Commercial Trust | Singapore; China (Commercial/Office + Hospitality) |
6.5% |
| 40 | Suntec REIT | Singapore; Australia (Retail + Commercial/office) |
5.6% |
7. Residential |
|||
| No | REITs And Stapled Securities | Country Exposure | Indicative Dividend Yield* |
*Chartbook: SREITs & Property Trusts (September 2021) – SGX report
There are currently no residential REITs or stapled securities listed in Singapore. Ascott REIT has certain residential properties in its portfolio, but is considered a hospitality REIT. Saizen REIT, a Japanese REIT that has been delisted since October 2017 was the last residential REIT listed in Singapore.
There are also three REIT exchange traded funds (ETFs) listed in Singapore.
REIT ETFs |
|||
| No | REITs And Stapled Securities | Listed REITs | Distribution Yield* |
| 47 | Lion-Phillip S-REIT ETF | Singapore | 4.3% |
| 48 | NikkoAM-Straits Trading Asia Ex Japan REIT ETF | Singapore; Malaysia; Hong Kong | 4.7% |
| 49 | Phillip SGX APAC Dividend Leaders REIT ETF | Singapore; Australia; Hong Kong | 5.1% |
*S-REITs Report Card: 2nd Quarter 2021
To stay up-to-date with the REIT market, DollarsAndSense also regularly writes a quarterly update on REITs, after they have released their results.
How To Start Investing In REITs?
We can invest in REITs the same way we invest in stocks and other listed securities on SGX. If we’re already investing in stocks, we can simply buy and sell REITs in the same manner.
As mentioned, if we’re entirely new to investing, we need a Central Depository (CDP) Account and a stock brokerage account.
Since REITs tend to pay out distributions of close to 5.9% per annum at regular intervals (quarterly or semi-annually). This makes it an ideal asset class to create a stable stream of dividend income. We can use this to continue growing our REIT or other investment portfolios, or even supplement our retirement income when we’re ready to retire.
Read Also: Here’s How You Can Start Building A Dividend Income Portfolio To Replace Your Wage In Singapore
What Are REIT ETFs?
In Singapore, there are currently three REIT ETFs listed on the SGX. They are 1) Lion-Phillip S-REIT ETF, 2) NikkoAM-Straits Trading Asia Ex Japan REIT ETF and 3) Phillip SGX APAC Dividend Leaders REIT ETF. We can buy and sell all three REIT ETFs on SGX as well.
Primarily comprising high-quality REITs listed in the Asia Pacific region, REIT ETFs are typically passively managed. The main advantage of investing in REIT ETFs is its ability to free us from having to research, monitor and rebalance our REIT portfolio. It also ensures our REIT portfolio is widely diversified across different REITs geographically.
Of course, for this convenience, we have to pay a management fee. Over the long term, this may eat into our returns, so we need to carefully judge whether or not to embark on REIT ETF investing. As it is, we’re paying two types of fees when we invest in REITs – REIT management fees and property management fees.
Here are articles that give us a little more information about the REIT ETFs listed in Singapore.
Read Also: Investing in REIT ETFs Listed In Singapore: 5 Things You Need To Know
Read Also: REIT ETFs – Really The Best Of Both Worlds?
Investing In A Managed REIT Portfolio
A new product on the market is Syfe REIT+, which provides investors with the opportunity to invest in a risk-managed portfolio of S-REITs. Offered by Syfe, investors get exposure to a portfolio built from 15 high-quality REITs, based on their own risk-profile.
If you are interested to get started investing with Syfe today, whether with the REIT+ portfolio or the global portfolio, DollarsAndSense has a special promotion for first-time investors to allow you to receive bonuses for creating and funding your Syfe account:
$10 bonus for the first deposit above $500
$50 bonus for the first deposit above $10,000
$100 bonus for the first deposit above $20,000
The bonus will be credited within 7 days after receiving your funds and invested together with the portfolio. To enjoy this promotion, you need to maintain the portfolio with Syfe for at least 6 months. Read more about the details for this promotion here.
Pros And Cons To Investing In REITs VS Physical Properties
Many of us may dream of owning our own private properties that we can collect lucrative rents on as well as capture high capital appreciation when an en-bloc opportunity or willing buyer comes along.
While we tend to only look at the positives, there are both pros and cons to owning properties VS REITs.
| Criteria | REITs | Physical Properties |
| Initial Capital Outlay | As little as a few hundred dollars | Minimum of 20% of property price, which is at least several hundred thousand dollars |
| Employing Leverage (a.k.a.using loans/debt) | Can leverage up to 3.5 times (depending on stock brokerage and actual REIT)
Interest rates from as low as 2.9%; but can be much higher – around the 6.0% range |
Up to 80% leverage on individual property. But, must adhere to TDSR and LTV limits
Interest rates hovering at the 1.5% or lower range |
| Administrative Work | Buy on via your brokerage account with a few clicks | Have to work with property agent, arrange viewing, negotiate price, make hefty down payment, secure loan facility, pay stamp duty, get a tenant |
| Liquidity | Can sell at market price during trading hours. Receive proceeds in a few days | Takes a much longer time to sell property and to receive proceeds after that |
| Diversification | REITs are diversified across multiple properties/buildings. Investing in REIT ETFs provides even more diversification benefits | Hard to invest in more than a couple of properties with hefty down payment requirements. |
| Management | Professional managers – which are paid a hefty fee | Manage own property |
| Control | Almost no control as small retail investor. Can only buy or sell | Have full control in how we manage property |
| Growing Portfolio | Can invest more in the same or other REITs with a few hundred dollars. Can employ regular investing strategies | Have to go through tedious process each time we buy another property. Down payment and loan restrictions also make it harder to grow your own property portfolio |
| Taxes | Dividends we receive are not taxable | Rents we receive are taxable |
| Managing Returns | Receive returns on a regular basis | May have to chase tenants and negotiate rents on our own. |
To read further on the pros and cons of investing in each asset class, here are some articles we’ve written on the topic.
Read Also: Property Lovers In Singapore: Invest Via Condos, REITS Or Real Estate Companies?
Important Questions We Should Ask When We Decide To Invest In REITs
# 1 Does The REIT Own High-Quality Properties?
One simple way to judge whether investing in a REIT will be a good long-term investment is simply to look at its properties. Many Singapore-listed REITs have properties in Singapore that we can go to.
Malls such as Suntec City, Vivo City, Plaza Singapura, Causeway Point, Takashimaya are all owned by different REITs in Singapore. We can choose to invest in REITs that own properties that we prefer visiting ourselves, as it provide a good indicator for how other consumers may think.
It doesn’t just stop at malls, there are office buildings such as China Square Central, Asia Square, Suntec, One Raffles Place and many more as well as industrial hubs such as properties in Changi Business Park, Airport Boulevard, Woodlands Central that are all owned by REITs. We can easily visit these properties or do a little desktop research into whether people like to dislike these locations and property type. Of course, it’s harder to assess foreign properties, so desktop research is still important.
# 2 Where Do You See The REIT In 10 Years?
Another good indicator is whether we see the properties in the portfolio continuing to do well in the next 10 years.
Some further questions may include:
- Are these properties well maintained or looks dated?
- Are these properties in good locations or ones that may go out of favour?
We could also look at how high geared these REITs are. REITs that have high levels of debt may be at higher risk when interest rates go up, or may not have as much opportunity to add to its portfolio.This may also be an indicator of whether they will be able to invest in new opportunities at the right time.
# 3 Does It Have A Management Team Your Believe In?
We could also go to the individual REITs’ Annual General Meeting (AGM) to speak to the management team. This may give us some insights into the character of the people managing our investments.
We should also look at its track record, are they able to spot good investment opportunities at good valuations? Are they fair to minority shareholders during rights issue or placements when they need to raise funds?
# 4 Are You Confident Of Choosing The Right REIT?
Lastly, we should ask ourselves if we’re confident of choosing the right REIT and investing at the right time.
If we aren’t so sure, we can invest all or part of our money via the REIT ETFs and via regular investment plans. This will ensure our portfolio is well-diversified and we do not time the markets.
Read Also: Step-By-Step Guide To Investing Using Regular Shares Savings (RSS) Plan
This article was first published on 19 June 2018 and updated with the latest information.
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