S-REITs outperform most regional peers

Singapore real estate investment trusts (S-REITs) continue to attract investors as they provide better returns than most of their regional peers while also outperforming stock market returns, according to a report by Asia Pacific Real Estate Association (APREA).

Findings of the report, which analyzed seven REIT markets in Asia up to April 2012, indicate an average 6.39 per cent dividend yield from S-REITs, above Japan’s 5.90 per cent, Hong Kong’s 5.16 per cent and Taiwan’s 3.33 per cent. In Asia, only Malaysia’s REIT market yields a better average return, at 6.51 per cent.

“Since their inception in 2002, S-REITs have achieved a higher average annual return than REITs in other Asian markets. This reflects the supportive regulatory environment, professional management, the overall attractiveness of this liquid investment class, attractive dividend yields and the general quality of underlying assets,” said Peter Mitchell, APREA’s chief executive officer.

S-REITs have also performed better compared to stocks listed here. The average annual return of local REITs is 14.2 per cent, higher than the 11.5 per cent from stocks. This performance level is common across Asia, with REIT markets in Japan, Hong Kong and Taiwan all outperforming their respective stock markets.

The findings reaffirm the REIT success story in Asia, where the first trust was launched in 2001 in Japan. Continuous growth of the REIT market in the decade since has pushed their total capitalization in the region to US$118.4 billion, out of which Singapore holds a 32 per cent market share, the second biggest after Japan.

“REITs have traditionally been viewed as a defensive asset class, underpinned by high distribution yields and low volatility. As well, in a low interest rate, high inflation environment, the attractiveness of real estate stands out. That is why REITs have constantly generated excess returns and should therefore continue to form an integral component of a diversified multi asset class portfolio,” said APREA chairman Lim Swee Guan.

Source : Today – 21 Nov 2012

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