There’s still some hope left for Singapore REITs

Find opportunities after the sell-down, says HSBC.

Times have been tough for Singapore’s REITs. Rents have been steadily falling for most sectors, while share prices have crashed in tandem with global market volatility.

However, analysts at HSBC believe that long-term investors will do well to take a second look at the sector after the steep sell-down.

“REIT prices reflect a large disconnect between implied valuations of underlying assets held by REITs and transacted prices in the physical market,” the report said.

Although the outlook for rent growth is lacklustre, HSBC expects asset prices to remain mostly firm given healthy investment demand. HSBC added that recent transactions and firm asking prices for assets support this view.

“This strengthens the investment case as over the long-term changes in asset value have been a good indicator of capital returns, which in turn have contributed to around 50% of the total returns for the sector,” said the report.