A Guide on REITs Investments in Singapore For 2019
Singapore’s property market is one of the fastest growing real estate markets in the world. In fact, it has been growing so fast that property prices are too expensive and out of reach for most of the country’s citizens.
Those who own properties especially rental property in Singapore have been enjoying significant rental returns. Most such property buyers bought or developed those properties when prices were low and affordable. However, purchasing properties or rental income today is a very expensive affair. However, people have been looking for alternative ways of investing in Singapore’s real estate market. REITs have particularly been quite an appealing alternative.
REITs performed quite well in 2018 partly due to the fact that they have been gaining more popularity as a real estate investment option. However, it might be quite an unusual territory for new investors and the constant market changes may also affect those who have invested in REITs. It is therefore important to get an idea of how the market will behave in the coming year so as to optimize investments.
Understanding how REITs work
If you have invested in REITs before, then chances are you know how they work. For those who are new to the idea and are planning to invest in the REITs market in 2019, a REIT is a pool of funds that are invested in purchasing a property. One investor alone may not have the financial muscle to purchase an expensive property. A pool of funds from investors is used by fund managers to purchase properties allowing investors to earn from the rental income of that property.
There are different kinds of rates which include;
- Commercial REITs- They are REITs that invest in office buildings.
- Retail REITs- They focus their funds on investments in the retail sector such as shops and malls.
- Hospitality REITs- They own hospitality buildings such as serviced residences, hotels, and boutiques.
- Industrial REITs- Their own properties such as warehouses, data centers, and logistics facilities.
- ETF REITs- They diversify their investments by investing in other REITs.
- Healthcare REITs- They invest in nursing homes and hospitals.
Market conditions may help you make well-informed divisions about the REITs to invest income 2019. Choosing the ideal REIT to invest in will require some analysis to determine the potential performance in the future, at least for the next 12 months.
Favourable market outlook for retail REITs 2019
DBS Group Research believes that REITs might perform quite well in 2019. This conclusion is based on the healthy demand within the retail space as well as strong and consistent take-up rates within the retail markets. Singapore’s retail sector has been experiencing significant growth and developers have been reacting. New structures for the retail sectors are therefore expected to keep popping up.
Jewel is one of the best examples of such developments. The Changi Airport Group revealed before its launch that Jewel had already achieved a 90 percent occupancy rate which reflects the impressive demand. This demand is good news for investors since it highlights the trend over the next year. Investors should thus consider putting their money in a retail REIT to take advantage of that growth.
Navigating the escalating real estate prices
As noted earlier, Singapore’s real estate market has been growing at a fast rate and property prices have also been skyrocketing. This includes the costs of developing those properties as well as land prices. This means the cost trickles down to the real estate property buyer, making real estate property more expensive.
REITs provide a better investment option for those looking for investment properties. Singapore’s real estate prices are expected to continue escalating in 2019. This means that investors will opt to invest in REITs given that the country’s REITs are expected to perform better in the coming year. REITs are not only a more affordable option for real estate investment but they also help investors avoid
Ideal REITs for 2019
Although there are many REITs currently in Singapore’s market, not all of them are ideal investment opportunities. Below are some of the best Singapore REITs to invest in next year.
- Ascendas REIT
This is currently the best REIT in the country and it has an impressive track record with impressive figures since last year. Ascendas’ market capitalization for its third quarter ended December 2017 was S$7.62 billion. The REIT reported that its revenue experienced a 4.1% year-over-year growth while its net income during the period was 1.7%. Ascendas is also the largest REIT in Singapore based on market capitalization.
- CapitaLand Commercial Trust (CapitaCom) REIT
CapitaCom slides into the second spot as the REIT with the second highest market capitalization thanks to some strategic moves. It has a particular focus on the office real estate segment which seems to be gaining momentum. It thus looks like investing in this company in 2019 might be a good move.
- CapitaLand Mall Trust (CapitaMall) REIT
This is the third largest REIT in Singapore volume-wise. It is attractive because it has been demonstrating noteworthy revenue growth despite kicking off 2018 at a slow pace. Some positive indicators and improved financial performance point towards CapitaMall being a good REIT that investors should consider.
- Mapletree NAC Trust
One of the reasons for which Mapletree NAC Trust has joined this category of best REITs is that it provides adequate protection in case things go south in the market. Its revenue has also been grown significantly since late last year although the growth has been quite slow. But that slow growth is not a bad thing at all considering that it has been steady growth. This is why this particular REIT has been growing more popular.
Investors have been embracing the idea of investing in REITs because they provide high yields. They also shield against the impact of the growing interest rates. The current market conditions and slowing economic growth have also been discouraging direct real estate investments and REITs provide a simpler option. Analysts expect REITs to perform better in 2019 than they did this year or in 2017 especially now that people are becoming more aware of them.