Interest rates are falling. Can Singapore REITs offer attractive dividend yields?

What happened?

Interest rates have been falling recently.

This has led to a bounce in the share prices of Singapore REITs.

Recently, we shared about 3 Singapore REITs with dividends yields of above 5%.

However, some investors have asked if it is possible to gain exposure to Singapore REITs without selecting individual REITs. 

In this episode of the Beansprout Podcast, we sat down with Bruce Zhang, Head of Fixed Income at CSOP Asset Management, to understand what falling interest rates mean for Singapore REITs, and how REIT ETFs offer investors a simple way to gain exposure to Singapore REITs. 

Catch the full conversation in the video below.

Interview with Bruce Zhang, Head of Fixed Income at CSOP Asset Management: What the recent Fed rate cuts mean for investors of cash products, bonds, and REITs

Interest Rate Environment and Market Impact [00:06:12 – 00:07:32]

• Interest rates have swung sharply over the past five years — from near zero during COVID-19 to rapid hikes starting in 2022.
• The US Federal Reserve began cutting rates again in late 2024, restarting the easing cycle.
• Lower interest rates tend to benefit assets that rely on borrowing, such as Singapore REITs.
• Singapore’s rates have fallen faster than US rates as the Monetary Authority of Singapore (MAS) continues its easing stance.

Cash and Short-Term Investment Products [00:07:36 – 00:09:23]

• Yields on T-bills and money-market funds in Singapore have fallen sharply.
• Investors looking for higher returns may:
  • Extend duration by moving into bond or credit funds.
  • Take slightly higher credit risk (e.g., BBB or BB ratings).
  • Explore US-dollar money-market funds yielding around 4 percent after fees.
• Always balance higher yields with potential risks like credit, liquidity, and currency exposure.

Singapore REITs and Interest Rates [00:18:18 – 00:20:01]

• Singapore REITs are clear beneficiaries of falling interest rates.
• Lower funding costs and better valuations support price recovery.
• Funding costs peaked in September 2024, so new refinancing is cheaper.
• This allows REITs to enhance assets, pursue acquisitions, and sustain distributions.

REITs’ Fundamental Strengths [00:20:20 – 00:21:54]

• Industrial REITs: Logistics and data-centre exposure remain in high demand.
• Office REITs: Maintain strong occupancy in CBD locations.
• Retail REITs: Supported by domestic spending and tourist recovery.
• Leases signed during COVID are now renewing at higher rents.
• Limited new supply keeps conditions balanced.
• Hotel REITs: Still lagging as post-pandemic travel normalises.

Shopping Mall REITs [00:21:59 – 00:23:41]

• Malls remain part of daily life in Singapore’s climate.
• Downtown malls benefit from tourist inflows and relaxed visa policies.
• Suburban malls attract consistent local traffic.
• Malls showed resilience even during COVID-19, proving their defensive qualities.

Retail Mall Challenges and Strengths [00:23:41 – 00:24:52]

• Rising operating and labour costs are pressuring some tenants, especially F&B.
• Strong, well-located malls can still attract new tenants quickly.
• Occupancy across most REIT sectors (retail, office, industrial) stays above 90 percent.
• Prime landlords can pass part of inflation costs on to tenants.

Individual REITs vs REIT ETFs [00:24:52 – 00:27:37]

• Picking single REITs (e.g., CapitaLand or Keppel DC REIT) offers potential upside but higher concentration risk.
• A REIT ETF provides easier access and diversification.
• CSOP iEdge S-REIT Leaders ETF highlights include:
  • Around 6 percent annual dividend yield since 2021.
  • Exposure to the largest and most traded Singapore REITs.
  • Diversified property sectors and lower trading costs than buying individual names.

Learn more about the CSOP iEdge S-REIT Leaders Index ETF here. 

REIT ETF Dividend Sustainability [00:27:37 – 00:29:28]

• MAS requires REITs to distribute at least 90 percent of taxable income.
• The CSOP REIT ETF pays out 100 percent of collected dividends.
• Estimated yield: about 5.5 percent p.a. — roughly 3.5 percentage points above Singapore’s short-term rates.
• Even with future rate cuts, the income spread over cash remains attractive.

Focus on Large and Liquid REITs [00:29:28 – 00:31:15]

• The ETF focuses on the largest and most liquid REITs listed on SGX.
• The index naturally rotates with market trends:
  • 2021–2022: overweight logistics and data-centre REITs.
  • Post-reopening: added exposure to office, hotel, and retail REITs.
• Helps investors capture sector rotations without active trading.

Positioning REIT ETFs in a Portfolio [00:31:15 – 00:32:39]

• REIT ETFs sit between bonds and equities in risk-return profile.
• Offer dividend yields near 6 percent with lower volatility (~15 percent annualised).
• Provide steady income and growth potential — a “fixed-income-plus” option.
• Suitable for investors seeking stability with better returns than cash or short-term bonds.

Yield Pickup and the Singapore Advantage [00:35:45 – 00:37:14]

• Singapore REITs yield about 5.5 percent, versus:
  • ~1.4 percent for Singapore short-term rates.
  • ~4 percent for US REITs.
  • ~3 percent for UK REITs.
• This yield advantage makes Singapore one of the most attractive REIT markets globally.
• REITs continue to offer strong income potential compared with deposits or equities.

Read also: Should you buy individual REITs or a REIT ETF? 

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