Will Singapore REITs finally recover in 2025?

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REITs

By Gerald Wong, CFA • 29 Nov 2024

Why trust Beansprout? We’re licensed by the Monetary Authority of Singapore (MAS).

We recently held a webinar to share our thoughts on Singapore REITs. Here's what you need to know about their outlook.

Singapore REITs 2025
In this article

What happened?

Singapore REITs have experienced significant volatility in recent months. 

After rebounding in anticipation of the US Federal Reserve interest rate cuts, their share prices have since declined by close to 10% and are now nearing 2024 lows once again. 

While some REITs have been able to raise their dividends, the distributions of most REITs remain under pressure. 

This has led to many REIT investors in the Beansprout Telegram community asking what we should look out for when investing in Singapore REITs. 

To address these inquiries, we held a webinar this week to explore the fundamentals and future outlook of Singapore REITs.

During the session, I highlighted the key factors I am monitoring to assess the potential direction of REIT share prices.

For those who couldn’t attend, here is the presentation I shared during the webinar.

Transcript of Webinar on "What's Next For Singapore REITs?"

Summary

  • Look at bond yields and not just headline interest rate changes.
  • Investors have moderated expectations for rate cuts in 2025.
  • Singapore REITs are trading within 10% of their 2024 low.
  • REIT sub-sectors face mixed outlook.
  • Look for REITs with ability to grow/maintain distributions and trade at attractive valuation.
  • Consider REIT ETFs to get broad based exposure to REITs

1:57 - 11:20 Market Update

  • The probability of an interest rate cut in December has come down to below 60%, from almost 80% a month ago.
  • With fewer rate cuts anticipated, bond investors are pricing in the likelihood of higher interest rates for a longer period, pushing bond yields higher.
image.png
Source: Beansprout

11:21 - 14:41 Impact on Singapore REITs

  • Higher financing costs from existing debt may lead to a decline in distributions and share prices.
  • Higher interest rates can lead to lower property valuations, impacting the book value of REITs.
  • Low-risk alternatives like Singapore Savings Bonds and T-bills may be more attractive to investors, reducing demand for higher-risk assets like REITs.
image.png
Source: US Federal Reserve

16:57 - 24:32 Retail Sector

  • Retail sales growth has been slow, with discretionary spending on items like apparel, watches, and jewelry declining.
  • Suburban malls have shown resilience, but downtown malls, reliant on tourist spending, are underperforming.
  • Retail rents have remained stagnant, with minimal increases due to subdued retail sales performance.
image.png
Source: Singstat

24:33 - 28:53 Hospitality Sector

  • While tourist arrivals continue to grow year-on-year, the momentum has slowed significantly compared to the post-COVID rebound.
  • Revenue per available room (RevPAR) growth has stalled, reflecting limited potential for further earnings growth from existing assets.
image.png
Source: STB

28:54 - 33:10 Office Sector

  • Downtown office vacancy rates have increased due to an oversupply of office space and muted demand.
  • New office spaces may further suppress rental growth if demand does not increase.
image.png
Source: URA

33:11 - 39:13 Industrial Sector

  • Rents for multi-user factory spaces grew but at a slower pace than in 2022-2023.
  • Business park rents declined due to a vacancy rate exceeding 20%.
  • A significant supply in the pipeline could lead to higher vacancy rates and rental pressure.
image.png
Source: JTC

39:14 - 41:01 Data Centres Sector

  • Data centres remain a bright spot, with near 100% utilization driven by demand from AI and cloud computing.
  • New data centre supply through 2027 has been largely pre-committed to anchor tenants, ensuring stability and mitigating oversupply risks.
image.png
Source: Keppel DC REIT

41:02 - 51:15 How to Find the Best Singapore REITs 

  • Check the latest interest rate expectations using the CME Fedwatch Tool.
  • Use the Beansprout REIT Screener to look for Singapore REITs in positive sub-sectors, and compare their dividend yields, gearing ratio, and valuation 

51:16 - 52:00 How to Select the Best REIT using Beansprout's REIT checklist

  • Use the Beansprout REIT checklist to understand the fundamentals, financial strength, and valuation of REITs
beansprout singapore reit checklist

52:01 - 53:07 Consider REIT ETFs to gain diversified exposure to Singapore REITs

  • Consider REIT ETFs for immediate diversification and exposure to a basket of different REITs.

Resources mentioned in the video

Join the Beansprout Telegram group get the latest insights on Singapore REITs, stocks, bonds, and ETFs.

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1 comments


  • Ben • 30 Nov 2024 01:52 AM
    • beansprout logo
      Beansprout • 30 Nov 2024 02:23 AM