6 Things About Singapore REITs For Investors To Know

Real Estate Investment Trusts (REITs) are a collective investment scheme that invests in properties that are rented out to tenants for rental income.

As a group, REITs in Singapore’s market have performed very well in the last few years (more on this later).

REITs provide investors a chance to invest in the real estate market at low cost and with much greater liquidity than individual properties. REITs also provide more diversification than owning a single property and also provides exposure to real estate markets that are outside Singapore.

Here are some interesting facts about the REIT market here:

1. In the five years ended 21 April 2017, Singapore REITs have generated an average annual return of 10%. This far outpaces the Straits Times Index (SGX: ^STI), which has returned only 3.9% a year for the same period.

2. There are currently 32 REITs and six stapled trusts in Singapore’s market.

3. The first ever Singapore REIT was launched in 2002. Ever since, the popularity of REITs have been increasing.

4. There are six major types of REITs to choose from, namely, Healthcare, Commercial, Industrial, Hospitality, Retail, and Residential. Some REITs fall into two or more of the categories.

5. There are two ETFs in the local market currently that tracks the performance of REITs in the Asia Pacific region. The first was listed in 2016.

6. In late 2016, the Straits Times reported that Singapore REITs’ average dividend yield of around 7% exceeded those of REITs that are listed in other developed markets such as US (6% yield), Australia (6% yield), and Japan (4% yield).

REITs have performed admirably in the last few years and it appears that more investors are turning to REITs as a way to generate income through their steady and high dividend yields compared to other asset classes.

However, it is important to note that a REIT is also a highly leveraged investment instrument, and is therefore susceptible to financial risks. Before investing in any REIT, you should consider the risks involved and whether or not REITs can be a suitable part of your investment strategy.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.