Understanding How To Buy REITs In Singapore And Other Overseas REITs
Investing in the property or the real estate market, in general, has become a culture that is embedded in families in Singapore. The country’s real estate market, therefore, developed massively allowing the market to mature but this has unfortunately resulted in high real estate prices, thus locking out most people. As a result, people have been seeking alternative and more attainable investment avenues thus the popularity of Real Estate Investment Trusts (REITs in Singapore.
What are REITs
REITs can best be described as organizations that pool funds from investors in order to invest and build a portfolio of properties that earn income by renting out or leasing the property. The rent collected is then shared out to investors as dividends. Singapore REITs are quite popular since many people choose them as an alternative through which they can invest in the real estate market.
If you are an aspiring investor, it would be therefore advisable to try out REITs as an investment option. Additionally, it is relatively easy to invest in them because they do not require a lot of technical know-how. In fact, they are a lot like.
How to invest in REITs in Singapore
Investing in REITs is quite easy especially considering that it is just like buying shares. If you aspire to invest in a REIT in Singapore, you will need an SGX CDP account and a brokerage account. Once you have the two accounts set up, then you should get the code of the target REIT that you plan to invest in, then use your brokerage account to buy into it. Alternatively, you can call your broker so that a manager can make the investment on your behalf.
If you are new to investing and do not have an account, there is no need to visit the SGX CDP offices which are located at Buona Vista and Raffles Place. This is because brokerages will allow you to apply for both accounts in one go. The whole process should take about seven working days.
Once the accounts have been approved, you can then carefully select the REIT that best suits you. Investors should consider some factors such as growth outlook, proper valuation, growth element, good dividend yield and a proper cap rate. Investors should also avoid investing in REITs based on dividends, avoid investments with high-interest rate risks, and also avoid investments in areas whose economic influences tend to be negative.
How Singapore can invest in overseas REITs
If you are from Singapore and you want to expand your REIT investment beyond the country, there are some factors to consider. The investor should first identify the ideal countries where you want to invest and then shortlist the best overseas REITs from those countries. The type of market definitely plays a key role in this case. For example, REITs in countries that register high economic growth might be the best overseas REITs to invest in. Additionally, not all countries offer REITs since it is not a common concept.
The concept of REITs has however been gaining traction over the past three years and some have already been launched in numerous countries since 2013. Some of those countries include Saudi Arabia, Kenya, South Africa, Ireland, India, and Bahrain. It might not be as easy to invest in overseas REITs as it is to invest in REITs in Singapore. This is because of the different regulations in each country. Singapore investors looking to invest overseas REITs should factor in the taxation structure and other requirements of the countries where they plan on investing.
Which are the best REITs in Singapore?
So far there are many REITs in Singapore and Just like the stock market, investors can choose which REIT they would like to invest in. Singapore has six main categories of REITs which are retail, residential, office, industrial, hospitality, and healthcare. Here are the eight top REITs in the country that might be the best bet for investors in 2018.
- Capital Commercial Trust
This is a commercial or office REIT that has been demonstrating significant performance in the country with total returns going above 20 percent. It has a dividend yield of 4.77 percent and its properties are mainly within the country’s Central Business District. Capitaland also happens to be the top property developer in Singapore and it had a 2.6 percent increase in its DPU in 2017.
- Suntec REIT
This is yet another REIT in Singapore that is a good performer, with its property portfolio mainly located in Singapore and Australia. It has a stake in 9 Penang Road, Marina Bay Financial Tower, and One Raffles Quay. It demonstrated stable performance in 2017 despite a slight decline in its DPU by 2.1 percent.
- OUE Commercial REIT
This Singapore-based REIT also has properties in key areas such as Lippo Plaza, OUE Bayfront, and One Raffles Place. It has a 6.6 percent dividend yield and it boasts of more than 95 percent occupancy rate in its key buildings.
- Frasers Hospitality Trust
This is one of the few hospitality REITs in the market and it also happens to be one of the major contributors to the REIT market in Singapore. Its portfolio also includes some residences and its properties are also diversified globally. It has an impressive dividend yield of 6.77 percent per annum.
- CDL Hospitality Trust
This REIT is highly attractive especially to those who wish to invest in the global tourism sector. Although it is present in Singapore, it also has properties in major cities all over the world such as Perth and Tokyo. Its dividend yield is 5.49 percent per annum.
Brokerages that deal with REITs in Singapore
As pointed out earlier, investors looking to invest in Singapore REITs can consult brokerages to secure accounts. There are some brokerages that deal with REITs in Singapore, such as OCBC Securities, DBS Vickers, Lim and Tan, Kim Eng, POEMS (Phillip Capital) and UOB Kay Hian.
Subscriptions through ATMs
Some firms are pushing things to the limit. For example, Manulife US Real Estate Investment which is one of the REITs in Singapore announced that it would issue 22 preferential units for every 100 units held by investors and that investors would have the option of subscribing through ATMs.
The process of applying for rights to shares in REITs involves inserting their ATM cards at ATM machines, clicking on the “investment services” section and clicking on “Rights application.” From there the process should be straightforward although there are more guidelines to go through before the process is complete.