How To Invest in Singapore Real Estate Through REITs

What do iconic properties such as Vivo City, Ascott Orchard, One Raffles Quay, and Changi Business Park have in common? Not much, at first glance. But look closer and you’ll realise that these properties are the key assets of some of Singapore’s largest real estate investment trusts (REITs). 

Singapore REITs (S-REITs) offer investors of all stripes an easy and affordable way to add the real estate asset class to their investment portfolios. Following the recent launch of Syfe’s REIT+ Portfolio, we teamed up with Singapore Exchange (SGX), Nikko Asset Management, and DollarsAndSense to hold a REIT investing seminar. The sold-out seminar was presented by Ms Emelia Tan, founding member of the Research team at SGX, Mr Calvin Neo, Product Development Director & ETF Specialist at Nikko Asset Management, and Mr Dhruv Arora, founder and CEO of Syfe. Mr Timothy Ho, Co-founder and Managing Editor of popular finance site DollarsAndSense moderated the panel discussion afterwards.

Our guest speakers shared more about their outlook for S-REITs and their views on why now is a good time to start investing in S-REITs. Here’s a snapshot of the seminar’s key talking points. 

S-REITs Offer Competitive Returns And High Yields

Singapore is one of the largest REIT markets in Asia; the 44 REITs and Property Trusts on SGX have a combined market capitalisation of more than S$100 billion. Over the past 10 years, S-REITs have outperformed Japan, Hong Kong, US, and Australia REITs. 

Source: SGX Presentation

The attractiveness of S-REITs is compounded by the fact that they offer one of the highest dividend yields and lower volatility compared to global indices. This makes S-REITs an ideal option for income-seeking investors with a more conservative risk profile. The lower volatility signals that the high yield is sustainable; S-REITs are not exposing themselves to risky assets in a bid to get higher yields.

Source: SGX Presentation

A Resilient Asset Class 

In the current lower-for-longer interest rate environment, S-REITs have turned in solid returns. The average total return for S-REITs was 23% in 2019. While there are some concerns about how the situation could change once interest rates rise, S-REITs have shown resilience against past interest rate hike cycles. 

Source: Bloomberg, SGX (Sep 2019). Note: Base of 100 from Dec 2002

In the long-term, REIT investors need not be overly concerned by rising interest rates. When markets are under pressure, interest rates are unlikely to rise. When interest rates do rise on the back of solid economic growth, broader market conditions become more relevant. Consumers are likely to shop, spend, and travel more, which will benefit REITs in the long run.

Given that most REIT managers would have locked in the low interest rates on their borrowings for the long-term, REITs are unlikely to be affected by short-term interest rate fluctuations as well.

S-REITs And Bonds: An Effective Pairing 

The Syfe REIT+ portfolio contains 15 quality S-REITs balanced with Singapore Government Bonds through Nikko Asset Management’s ABF Singapore Bond Index Fund, the first exchange traded fund (ETF) bond fund in Singapore. 

This unique pairing is effective for several reasons. The ABF Singapore Bond Index Fund has generated returns of 2.73% since its inception in 2005. A key reason for its performance is its investment in Singapore government bonds, one of the world’s highest-yielding AAA-rated government bonds. Singapore government bonds are also perceived as a safe haven asset when markets dip. This makes the ABF Singapore Bond Index Fund an excellent addition to the Syfe REIT+ portfolio from a risk-management perspective.

Additionally, REITs and Bonds have almost no correlation, which means the price movement of one asset will not affect the price of the other. In other words, the combination of REITs and Bonds offers investors a diversified portfolio that is effective even in different market conditions.

Source: Nikko AM Presentation

Peace Of Mind With Syfe REIT+ 

REITs, like all investments, carry a certain amount of risk. The Syfe REIT+ portfolio is designed to provide sustainably high yields while managing risk. Syfe’s Automated Risk-managed Investing (ARI) approach manages your REIT+ portfolio to maintain a Downside Risk of 15%. This is done by dynamically adjusting the REITs and Bond allocation in your portfolio.

When higher volatility is forecasted, ARI will increase your bond allocation to mitigate the risk in your portfolio. When markets are performing well, ARI will increase your REITs allocation to deliver better returns.

To learn more about the Syfe REIT+ portfolio, click here and start your REIT investing journey today with Syfe REIT+.