REITs ditch Singapore’s overrated property market

Offshore assets are more competitive now.

A dearth of suitable assets is pushing Singapore-based REITs to invest more capital into overseas markets, according to the latest to the latest Emerging Trends in Real Estate Asia Pacific study.

Singapore’s highly-concentrated REIT market, coupled with the city-state’s limited and highly-regulated land space, means that domestic REIT activity is naturally constrained.
Another issue plaguing the market are rents, which have weakened considerably despite stable capital values.

In addition, the rising base rate in the city-state has increased REITs’ financing costs—a trend that can only continue if the Singapore dollar weakens further, the study said.

“REITs have taken the view that offshore assets can be more competitive, just as sustainable in earnings, and for the most part, whatever risk there is associated with the repatriation, the currency, interest rates, or what have you can all be boxed in,” said one REIT manager who participated in the study.

Australia in particular has seen substantial buying activity from Singaporean REITs in 2015, with one especially large deal in the logistics sector. Singaporean REITs have also bought assets in Japan, China, and South Korea during the year