It is no secret that property prices in China have exploded over the past decade. High economic growth and rising middle-income population have been catalysts to the double-digit annual growth in property prices in most cities in China.
Moreover, analysts continue to believe that prices will continue to rise despite new government cooling measures in place. One of the reasons they point to is that property prices in major cities in China are still well below their global peers. The average price in London is 2.5 times that of Beijing, while Singapore property prices are three times that of Shanghai. Also, the population of major cities continues to grow, which will further fuel demand.
With that in mind, here are two Singapore-listed REITs that can give investors exposure to the fast-growing China real estate market.
CapitaLand Retail China Trust (SGX: AU8U) invests primarily in shopping malls located in China. It has a portfolio of 11 shopping malls located in different cities across the nation, including malls in Beijing, Guangzhou and Shanghai.
As at 31 March 2018, the trust had a gearing ratio of 32.5%, well below the regulatory cap of 45%. It has also managed to increase its distribution per unit over the most recent quarter by 0.4% and reported strong positive rental reversion of 12.8%, which bodes well for future rental income. Despite the challenges posed by e-commerce, the REIT continues to see increasing shopper traffic and steady growth in monthly tenant sales.
As at the time of writing, units of CapitaLand Retail China Trust exchanged hands at $1.55 per unit. That translates to a price-to-book ratio of 0.94 and an annualised distribution yield of 7.1%.
EC World Real Estate Investment Trust (SGX: BWCU) has a portfolio of six properties located in Hangzhou and one in Wuhan City. The REIT specialises in investing in port logistics, specialised logistics and e-commerce logistics real estate.
The REIT has a high net property income yield of 6.4% and has one of the lowest gearing ratios among REITs listed in Singapore at just 28.9%. The low gearing gives the REIT additional debt headroom to fund more yield-accretive acquisitions in the future. Moreover, the REIT has signed built-in rental escalation contracts with its tenants, which should provide visible organic income growth in the future.
Currently, units of EC World REIT trade at S$0.72 per unit. This equates to a price-to-book ratio of just 0.77 and an attractive distribution yield of 8.2%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation for CapitaLand Retail China Trust. Motley Fool Singapore contributor Jeremy Chia owns units in EC World Real Estate Investment Trust.