Real estate investment trusts (REITs) have long been an attractive option for real estate investors for their versatility and moneybags-making potential. This year, one particular market for REITs is gaining so much buzz that it’s getting harder to ignore: Singapore.
Singapore REITs have been recently making headlines and for good reasons. Despite appearing overvalued (their prices surged by 18 per cent early this year), better government policies are prompting a rise in interest and investments in this type of company. Below, we broke down why REITs are proving to be a good investment for foreigners and locals alike.
Conducive Local Policies
The Monetary Authority of Singapore recently announced that it was mulling over increasing the borrowing limit for REITs from 45 per cent to 50-55 per cent of the property value in question. According to the Nikkei Asian Review, if this law is passed, it is expected to make local REITs more competitive with foreign companies. The extra capital will also mean that they will have more funds to bid for and acquire new projects. Another potentially beneficial policy for Singapore REITs is cutting down the time for REITs to gain unit-owners’ approval for related party deals and mandatory quarterly reporting, which are said take up enormous amounts of resources.
Soaring Dividends for the Past Years
The dividends of REITs, in general, pay more than your typical government bonds. According to Motley Fool, the higher yield, as well as its stability, are what make them a great choice for risk-averse investors. One company that has delivered well for its stockholders is First Real Estate Investment Trust. Motley Fool is betting on the company to even increase current earnings by two-fold in the next five to seven years. While no company is the same, the earning potential of REITs, and what experts forecast are about them in Singapore, can be telling.
Good Real Estate Environment in General
Sales in Singapore’s real estate environment have risen by 49 per cent for the past quarters due to commercial real estate sales. According to the Times, over half of these sales are from commercial real estate deals translating to S$6.7 billion.
Interest rates might also be lowered soon, as central banks soften financial policies. These types of developments often lead to better market performance, not just in real estate, but also in other sectors of the economy.
If you would like to receive some advice on how to navigate Singapore’s real estate environment, consider hiring a property management company. Singapore real estate consultancy firms are equipped with the expertise to assist you in complying with local legislation and filing the correct forms and taxes for your property acquisition. These companies offer end-to-end solutions for buyers’ needs, and can assist you with financial and leasing services as well.
Investing in Singapore as a foreign individual or business entity is no longer a daunting, resource-consuming endeavour, thanks to relaxed policies, a rosy real estate environment and the availability of property advisory firms. If you’re still doing due diligence on the market, continue to watch this space for more updates.