According to the data compiled by Bloomberg, Singapore?s real estate investment trusts (REIT) performed well this year, attracting investors to buy properties across Asia. The Bloomberg data states that Singapore?s $38 billion REIT market returned an average 37 percent this year, twice gains in the US, UK and Japan. Meanwhile, Australia, which tops the list in the Asia-Pacific region, advanced 24 percent.
Singapore?s REIT market performance was caused greatly by asset acquisitions and rental appreciation. According to CBRE Group Inc., between 2008 and 2011, Singapore?s total rental revenue increased 5.8 percent annually.
Regional director of the capital markets group at Cushman & Wakefield, Priyaranjan Kumar said in an interview that Singapore remains one of the last few AAA rate economies in the world. Bloomberg added that the gap between their yield and interest rates is double of what Australia had. its property trusts in the island-state offer an average 413 basis-point income return premium relative to 10-year government bonds while Australia only had 192 basis points.
The data compiled by Bloomberg also showed that Singapore?s REITs have a dividend yield of 6.46 percent compared to the 4.93 percent record of Hong Kong and 5.01 of Australia. Singapore is expected to continue to improve in the coming years. In fact, the International Monetary Fund predicts in its World conic Outlook Report that economic growth in the Southeast Asian island-nation will increase to 3.9 percent next year from the recorded 2.7 percent in 2012 while the US and other advanced economies are expected to expand 2 percent.
The IMF also added that Singapore has the world?s biggest budget surplus relative to economic output. The Singapore dollar is the second best performer in currency this year, after the Philippine peso, said Bloomberg. It is also one of the seven nations with AAA ratings and stable forecasts from Moody?s Investors Service, Standard & Poor?s and Fitch ratings. Aside from increase in rents and asset acquisitions, tax incentives which include exemptions on foreign income, also helped boost demand in Singapore.
According to Jason Kern, managing director and head of real estate and lodging advisory for Asia-Pacific at HSBC Holdings Plc, Singapore also offers a pipeline of assets, fair regulatory environment and a base of international investors and quality sponsors. A sponsor is a developer with a stake in the REIT and whose properties form the trust?s pipeline of assets to be purchased.
Kumar also added that after the global financial crisis, investors started to look into a more transparent, predictable markets with sustainable income profits like Singapore. They had also outperformed the city-state?s benchmark, Straits Times Index. This is a big leap, a sharp recovery for Singapore?s real estate market after the first quarter of 2009.
But despite positive forecasts on Asian REITs, CBRE analysts Ada Choi and Leo Chung stated on their report last month that REITs in Asia will likely turn more selective towards future acquisitions because of the predicted global economic slowdown. Wee Khim Loy, credit analyst at Standard & Poor?s said that this makes the outlook for the country?s commercial-leasing segment to be more challenging and the funding environment to be more volatile in the next few years.
Despite challenges, Standard & poor?s believe that Singapore REITs can handle tight operating conditions as the trusts increased their financial flexibility and diversified their funding sources. Because of uncertainties in terms of economic outlook, investors are looking for stability and defensive earnings, according to Eddy Loh of Barclays Plc.
The three-month Singapore Interbank Offered Rate is at an all-time low of just under 0.4 percent according to Bloomberg and the performance of real estate trusts is causing a number of initial share sales by REITs that may stop at $2 billion with as many as six companies planning to list their assets.
However, Tim Gibson, a Singapore-based fund manager for Asia-Pacific property equities at Henderson Global Investors, said that Singapore will see money flowing into REITs as people continue to chase yields. But if interest rates start to increase, it could slow down and eventually stop the flow of money. But with Singapore?s strong performance, it?s too early to predict what will happen.
Original Article: BloombergPhoto Credits: Patrick DK and 401(K) 2012 via Flickr Creative CommonsTokyo Apartments For Sale | Tokyo Apartments For Rent | Real Estate Japan
Source: http://www.realestate.co.jp/2012/09/05/singapores-reit-market-the-worlds-best/
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