SREITs seek refuge overseas as local property sales dearth escalates

Three locations are in the spotlight.

As the local residential property market continues to cool, SREITs are fleeing to overseas destinations in droves to search for greener pastures.

According to a report released today by Colliers International, government policies to cool the real estate markets in recent years prompted Singapore investors to venture overseas for better yields and diversification.

From October 2013-2014, the top three outbound investment destinations for Singapore investors were London, Sydney and Tokyo.

Singapore investors injected over $5.53b (US$4.3b) into 28 London properties. REITs clinched 36 properties in Sydney for over $3.48b (US$2.7b), while 7 properties were acquired in Tokyo for $2.96b (US$2.3b). 

“The results are not surprising, as most Singapore investors tend to be more risk averse when investing overseas. Although they seek relatively higher returns, Singapore investors also prefer investments providing them with stable income; therefore, they prefer to invest in mature markets that offer the risk/return profile investments that they are unable to get back home,” noted Terence Tang, Managing Director, Capital Markets & Investment Services Asia at Colliers International.

“Consequently, in addition to REITs and funds investing in stable-income assets in these markets, we also see traditional developers acquire commercial buildings and hotels that provide secured recurring income. Only some investors will undertake development opportunities, such as Oxley in London and Keppel Land in New York, but they will partner a local developer to do so,” he added.