Singapore’s REIT market may get boost from new overseas players

Singapore‘s fast-growing REIT sector may yet get another boost from the rise of new overseas players.

Property analysts Channel NewsAsia spoke to believe that there will be an influx of cross-border REITs listing in Singapore.

That’s because Singapore-listed REITs still enjoy attractive yield premiums over their regional competitors.

The total market capitalisation of Singapore’s real estate investment trust sector was S$500 million four years ago.

Today, it has ballooned to some S$15 billion.

The figure could double to S$30 billion by 2010, predict investment houses.

And some of this growth could be driven by cross-border listings of overseas REITs, by investors seeking tax advantages here.

Knight Frank’s director, Nicholas Mak, said: “Going forward, one of the growth areas for REITs is to hold assets that are located overseas… But these countries must have certain framework and certain characteristics to make their assets attractive to REITs. For example, there must be an adequate legal and corporate framework, laws that are friendly to the ownership of foreign properties, and yield-accretive. Properties must be able to generate regular income stream.”

Japanese funds, for instance, could start launching REITs in Singapore next year when their domestic investment laws are relaxed.

A number of Australian funds have also indicated their interest in establishing infrastructure funds and REITs based in Singapore.

Analysts say Singapore’s REIT market is still young compared with the US, Japan and Australia.

Currently, the local REIT market is limited to traditional property sectors, industrial, commercial, retail, hotels, and service apartments.

Savills’ director for marketing and business development, Ku Swee Yong, said: “In other countries, you could have a wider range of properties, entertainment type of properties, golf clubs, even some government institutions could be REITed. So Singapore would develop further this way.”

Yield premiums are still seen as comparatively attractive.

Singapore REITs are currently trading at 170 basis points above government bonds – relatively higher than competing markets in the region such as Hong Kong, Japan and Australia.

Source: Channel NewsAsia, 15 December 2006 

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