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Real estate investment report places Singapore among top cities

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Author: Ravi Philemon

Cushman & Wakefiled’s real estate investment report places Singapore firmly at the 6th spot. The real estate investment report said that Asia Pacific is the biggest source of cross border capital for the fourth year running, led by Singapore and South Korea. The region also claims seven of the top 25 cities.

Tokyo has claimed the top spot as the highest-ranked market for real estate investment in Asia Pacific, according to Cushman & Wakefield’s ‘Winning in Growth Cities’ real estate investment report. Tokyo replaced Hong Kong, which saw a notable fall of 38% y-o-y.

Winning in Growth Cities’ is an annual real estate investment report examining global commercial real estate investment activity, assessing cities by their success at attracting capital. The report includes indexes showing the top cities for real estate investment; cross border investment; most attractive sectors; sources of international capital; and regional versus global allocation of capital.

The real estate investment report also features a section examining the impact of climate change on the real estate investment market, and the top cities for investment excludes development.

Asia Pacific claimed seven of the top 25 cities compared to five in Europe. As with North America, a number of these destinations were in growth mode and the top 25 overall again outperformed, with volumes rising 5% and their market share increasing from 53% to 56% as investors focused on the biggest and most liquid markets.

Beijing was the fastest growing major Asian city, with volumes doubling, resulting in the city moving up 11 places in the ranking to number 25.

Globally, New York strengthened its position as the number one global city for real estate investment, growing 20% year-on-year to take the top spot in the index for the eighth year running. Los Angeles took second spot, while San Francisco climbed three places to third – in the process overtaking London in fourth and Paris in fifth.

Francis Li, International Director, Head of Capital Markets, Greater China at Cushman & Wakefield, commented: “Asia Pacific remains a global growth leader and investors will continue to channel funds here to ride the region’s long-term structural dynamics. While investors will turn more selective in a late cycle environment, gateway cities with stable fundamentals will continue to lead investments. We believe the region’s diverse economic backdrop and demographically driven growth markets in India and Southeast Asia to remain compelling prospects across cycles; the current round of deleveraging in China have also unlocked opportunities across its cities.

“Tokyo’s rise up the rankings ahead of Hong Kong comes as no surprise due to its strong fundamentals, fed by a tourism boom and investment momentum in the run up to the Olympics. The city’s real estate is in an investment sweet spot: strong pre-leasing commitments and robust demand have whittled office vacancies to record lows and the lower-for-longer environment continues to fuel investments by J-REITs and foreign funds.”

real estate investment report

Source: Cushman & Wakefield, RCA

Cross Border Investment
The sources of capital crossing borders into real estate grew more diverse in the past 12 months. For the fourth year running Asia Pacific – led by Singapore and South Korea – remained the biggest source region overall despite outbound volumes dropping nearly 13% and its market share easing to 38% overall. Singapore investors were the most prolific, ranking 4th globally, followed by South Korea, ranking 7th after a 50% increase in cross-border spending over the year. Japanese capital also continued to stir, rising 61%, ranking as the 13th largest source of international capital. Last year’s regional leaders, China and Hong Kong, both fell back into 11th and 8th place respectively

Investment Outlook
In Asia Pacific, growth may be set to slow further next year whether looking at consumption or employment figures, but overall will remain attractive on a global basis and more foreign capital is likely to flow towards the region. Occupier markets are mixed, with some seeing increased supply and others slowing demand, but the market offers a wide range of cities as investment options and sector-by-sector there are attractive areas for short- and medium-term returns. These may be in still demand-driven parts of the CBD office market, the largely under supplied logistics sector, or demographically driven residential markets.

 Carlo Barel di Sant’Albano, Head of Global Capital Markets at Cushman & Wakefield, stated:
“Ongoing headwinds, such as geopolitical unrest, means economic growth will remain in doubt in the months ahead, but it also means quantitative easing and negative interest rates are back on the agenda. As a result, property yields will be seen to offer better value and could fall into 2020 once investors have more faith that the cycle still has some life in it. However, buyers will have to find additional opportunities if they are to allocate capital, with a particular focus on alternatives and residential/multifamily likely to be seen.”

David Hutchings, Head of Investment Strategy, EMEA Capital Markets at Cushman & Wakefield and author of the report, added: “What differentiates markets going forward will be less about growth – that will be down – but more about relative financing costs, the timing and direction of structural market shifts and, as ever, finding stock in a global market with relatively limited distress.

“We expect more M&A activity as a result but also more pressure on investors to diversity to both gain exposure to the right cities and to reduce risk. Residential will be the asset class to watch and will continue to rise as the professionally managed rental sector continues to grow and mature.

“The winning markets of 2020 will be the biggest and best across gateway and challenger cities, but increasingly those with the right mix of strong innovative governance on the one hand and appeal to talent on the other.”

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Renovation trends to inspire homeowners – what are they?

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Author: Ravi Philemon

Not everything seen and pinned in your renovation trends browsing can work well for a home in Singapore

By: Hitesh Khan/

Everything you do to make your dream house come true; flicking pages of interior design magazines, looking at homes around you, browsing home renovation websites for design inspirations and consolidating numerous virtual mood boards. But not everything seen and pinned in your browsing can work well for a home in Singapore. Apart from style, functionality and ease are equally important. There are two important factors to think about when doing renovation, i.e. our hot and humid climate, and lack of space.

These are 5 simple renovation trends that could inspire homeowners.

1. Hardwood flooring
It may be appealing to place hardwood flooring to add a touch of elegance and a sense of warmth to your homes. However, the high humidity level in Singapore can cause the flooring to warp or swell in the long run. It is not possible for you to switch on your air conditioner 24/7 to reduce the humidity level in your home in order to maintain your hardwood floor as the temperature inside and outside of your home are different and could cause condensation. Different climatic conditions will cause little gaps in hardwood flooring that would attract termites.

Alternative: Choose a wood-like tile & laminate it with wood-grain pattern or vinyl wood-like flooring which are more cost-efficient. If you still want real wood, choose teak. It is commonly used for outdoor flooring which is more durable for expansion & contraction.

2. Small Tiles
Small tiles as an accent for your room will help to make your room look stylish and more spacious. But while they may look great, they are not the best choice for a home in Singapore. The high humidity level will cause bacteria, moss and fungus to grow faster and you will find them more difficult to be cleaned.

Alternative: Keep small tiles to accent walls, rather than the entire surface. You can also play around withthe patterns using small tiles in the wall. Remember…just use it as accent!

renovation trends

Renovation trends that ill work in a kitchen (Image credit: Grant McLean/Flickr)

3. Kitchen Island & Freestanding Bathtub
Kitchen islands and freestanding bathtubs are the epitome of luxury and opulence, but because they are positioned in the middle of the room, they tend to take up a lot of square footage.

Alternative: If you insist on having a kitchen island, choose hybrid islands that do double duty; where they can also serve as a dining table or storage space for instance.
Instead of going for a freestanding bathtub, consider a glass-encased shower with a rainfall showerhead instead to achieve the luxury feel without taking up too much space.

4. Walk-In Wardrobe
You love it for the luxurious feel it gives your home, but it’s a luxury that should be reserved for those with a sprawling mansion—or an extra room to spare.

Alternative: Rather than convert a part of your already small bedroom into a walk-in wardrobe, a built-in wardrobe would hold your clothes just fine. As it is flushed to the wall, it takes up minimal room while giving a clutter-free appearance. Wish to parade your fashion accessories? Go for see-through panels or open shelves.

5. Wallpaper
Choose a bold print, and you can create instant panache. Choose a calming motif and your home becomes a soothing sanctuary. But While wallpapers are one of the easiest style changers, they do not do so well in our humid climate. The humidity will cause the wallpaper glue to come off in the long run and causing the wallpaper to curl and peel.

Alternative: If you wish to incorporate wallpaper, stick to feature walls that are away from wind.

What every first time homebuyer should know

In implementing any renovation trends, it is usually best to leave the work to professionals, including, often, an architect or interior designer. A do-it-yourself job that is poorly done detracts from, rather than adds to, the value of the home.

The rule of thumb in home improvements: Stick to the basics. Equal home improvements aren’t necessarily of equal value at resale time. And don’t expect to recoup your entire investment for each improvement. Some can bring a 100 percent return, while others will net no more than 50 cents of the dollar, or less, in the best of times.

There is no rule of thumb on how many improvements you should make to up the home resale value. But even if your pocketbook can handle a big job, you probably shouldn’t do more than one improvement at a time.

And you should always keep in mind that the changes must not only be compatible with the rest of the house, but they should fit in with the neighborhood too.

Cleaning up, finding the right real estate agent, and updating small things like light fixtures will help your home sell fast without expensive staging. The best, smartest thing a homeowner can do is find the right real estate agent for them. Step back and try to look at your home the way someone else would for the very first time.

Whatever renovation trends you choose, knowing how it will affect the property valuation is of paramount importance to a home owner. It can help you determine whether you are overpaying for a home, or whether you have gotten yourself a real bargain. Paying the right price is just one way you can avoid overspending on your property.

Another smart way to avoid overspending on your property is to get the right loan. Getting the right loan can be a much simpler task, but only if you get the right person to it for you.

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Yarwood Ave GCB up for sale again at same $23m guide price

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Author: Ravi Philemon

A Yarwood Ave GCB is being put on the market again at an unchanged guide price of $23 million

A landed, two-storey Good Class Bungalow (GCB) at 18A Yarwood Avenue is set to go up for auction soon. Located in Kilburn Estate, the 999-year leasehold Balinese-styled GCB is an owner’s sale with a guide price of S$23 million.

The resort-like, Yarwood Ave GCB has a land area of 18,911 sq ft and floor area of approximately 8,956 sq ft, including a car porch and cosy, sheltered terraces totalling a size of 678 sq ft. The guide price works out to about $1,216 per square foot, based on a land area of 18,911 sq ft. It is an owner’s sale. A public auction for the bungalow will be held on Oct 16 at 2.30pm at Amara Hotel, Level 3.

Yarwood Ave GCB

Image credit: Knight Frank Singapore

The tastefully designed Yarwood Ave GCB also has a basement, swimming pool, beautiful landscaped garden and koi pond.

The earlier sale attempt by Yarwood Ave GCB owners took place less than a month ago at a Sept 18 auction. “It was not successful because we had less than a week of marketing due to late instruction,” Sharon Lee, director and head of auction at Knight Frank Singapore, told The Business Times.

“The property has an accessible price point for a GCB of its calibre and is within reach for those looking to live in a home that is limited in supply,” Ms Lee said.

The Yarwood Ave GCB has an accessible price point for a GCB of its calibre and is within reach for those looking to live a home that is limited in supply. It is also located within walking distance to King Albert Park MRT station, with amenities such as a movie theatre, dining options and a supermarket conveniently situated at KAP Shopping Mall and Bukit Timah Plaza.

Successful sales of properties along the same stretch include the home at 19 Yarwood Avenue, which sold for S$22.15 million February this year and 21B Yarwood Avenue, which transacted for S$19.4 million in March 2018. The properties sat on land areas of 19,030 sq ft and 16,156 sq ft respectively.

GCBs have been in the spotlight since news broke recently that Sir Dyson had forked out $41 million for a hilltop GCB located along Cluny Road with views of the Botanic Gardens, Singapore’s first and only UNESCO Heritage Site.

List Sotheby’s International Realty (List SIR) which reported on the purchase of Sir Dyson, noted that what makes this GCB deal an even greater surprise is that landed properties in Singapore, including the 2,800 plots located in the 39 GCB areas gazetted by the Urban Redevelopment Authority (URA), are classified as restricted properties and are limited for purchase and ownership by Singapore Citizens only. Besides their rarity, GCBs also come with strict planning conditions stipulated by the URA to preserve their exclusivity and low-rise character.

Even ultra high net worth investors, such as the Dysons, need to get special approval from the government to purchase and own GCBs because they are permanent residents. Criteria include making exceptional economic contributions in Singapore and the buyer can only use the GCB for owner occupation.

According to the Singapore Residential Property Act, foreigners are not allowed to own landed properties, which include bungalows. However, foreigners are allowed to own the bungalows at Sentosa Cove, a planned resort island to attract high-net-worth (HNW) foreign investors. Foreigners are allowed to own apartments in Singapore.

More recently, a GCB plot in the prestigious Nassim Road area was bought by SG Casa Pte Ltd for a record $230 million. The price for the sprawling land of 84,543 sq ft land works out to be S$2,721 psf. The plot of lands comes with a two-storey bungalow, a tennis court and swimming pool. The site has a road frontage that is nearly 100m, and can be redeveloped into four or five bungalows.

Only six super penthouse transactions took place in Singapore in last 13 years

List SIR in referring to media report suggested that the party behind SG Casa could be Eduardo Saverin. Mr Saverin became a Singapore citizen in 2012.

Sir Dyson, who is chief executive of Dyson Ltd, had earlier bought the most expensive 99-year-leasehold penthouse situated on a 62nd to 64th floor in Wallich Residence. The three-storey penthouse comes complete with a private infinity pool, jacuzzi, barbecue pit, and private lift lobby.

Besides Dyson and Saverin, another famous name that has been making rounds in Singapore’s media landscape was Jack Ma, who is said to have purchased a 30,000 sq ft site at Victoria Park Close. The Alibaba co-founder is supposedly building a two-storey bungalow with a basement and swimming pool.

The report by List SIR said, ” in light of the geopolitical tensions in Hong Kong and United Kingdom, there could be increased interest from more foreign ultra high net worth investors, the likes of Sir Dyson. Singapore’s solid economic fundamentals, sound financial framework, ease of doing business, quality education and racial harmony continue to make it one of the choice locations for potential foreign investors.”

Mr Paul Ho, chief mortgage consultant at iCompareLoan, said, “with political stability, it is understandable why Singapore looks attractive to ultra high net worth investors. Due to its limited supply and the prestige associated with these large bungalow plots, GCBs – such as the Bukit Pang GCB – are often sought after by well-heeled individuals.”

He added, “Singapore’s business-friendly environment also attracts many ultra high net worth investors to park their assets here. Prices of GCBs have been on a steady increase since 2016 and so it is viewed as a good investment.”

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Prime retail rents pushed higher by tight supply, Research

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Author: Ravi Philemon

Despite structural shifts in spending habits towards online and more experiences, prime retail rents bucked the trend

Market confidence might have dented due to weaker economic growth and the escalation of the US-China trade war but landlords have been able to hold their rents steady due to tight vacancies and limited upcoming supply. In fact, Grade A CBD rent increased marginally by 0.4 per cent to S$10.65 psf/month in 3Q2019 after remaining flat in the preceding quarter, due partly to landlords of less premium spaces playing catch up with better quality buildings.

Singapore’s economic growth fell to 0.1 per cent year-on-year in 2Q2019. On a quarter-on-quarter basis, the economy contracted by 3.3 per cent, stoking fears of a technical recession if anaemic growth continues into the fourth quarter. Based on Ministry of Manpower’s figures, the net addition of workers in the financial and insurance, infocomm and business services remained healthy at 6,200 in the second quarter of this year, although lower than the 8,500 employed in the first quarter.

Overall office demand has slowed, but emerging sectors within the technology space such as artificial intelligence (AI) and data analytics are increasingly starting to fuel the demand for office space. For instance, an AI start-up SenseTime, backed by Temasek, which took about 10,000 sf (square feet) in Frasers Tower, is planning to triple its Singapore staff to 300 in three years.

Are Singapore Banks transferring Interest volatility risks to consumers?

Demand for office space continued to be anchored by coworking and technology in the third quarter of 2019. In July, WeWork leased the entire 200,000 sf in 21 Collyer Quay, with plans to open in 2021 after current tenant HSBC vacates the building. Although there is currently some concern over the longer-term sustainability of the sector, companies cutting costs may actually find coworking spaces more attractive as they would not need to spend capital expenditure upfront to fit-out a traditional office.

The flexibility to increase or decrease the number of members on a monthly basis is also a big draw to companies who are facing an uncertain outlook. New coworking operator One&Co by JR East Singapore just opened a 13,000 sf coworking centre in Twenty Anson to help connect the Japanese and Singapore companies. Demand from the financial sector held steady. For instance, American Express leased three floors at One Marina Boulevard and helped to back fill the space left behind by Microsoft, which had earlier made the move to Frasers Tower.

June Chua, Head of Leasing, Cushman & Wakefield said “Locating in a coworking centre is still a viable option for corporates especially for capex management, and office landlords are recognising that capex remains a challenge for tenants. Should the economy start to weaken, we may reasonably expect some landlords to start offering subsidies for fitting out work in order to secure tenants.”

Christine Li, Head of Research, Singapore and Southeast at Cushman & Wakefield said, “Event risks such as US-China trade war and Brexit have increased uncertainties for corporate occupiers, who could put expansion plans on hold and wait for greater clarity in the near term. Should the global economy continue to run in low gear, office demand from corporates may slow down and spur more right-sizing amongst corporate occupiers going into 2020.”

“Rents are still holding up at the current level at for many buildings due to the lack of CBD supply through 2021, but competition for potential tenants is likely to intensify, especially with more flexible office operators joining the fray. Occupiers could also expand their search to city fringe or even suburban locations with good infrastructural connections and local amenities. This would increase their range of leasing options.”

prime retail rents

Despite structural shifts in spending habits, prime retail rents bucked the trend and continued to rise in Q3 2019 (Image: Capitaland)

Low Supply Pushes Prime Retail Rents Higher

Despite structural shifts in spending habits towards online and more experiences, Orchard prime retail rents bucked the trend and continued to rise in Q3 2019, driven by low supply of prime space and higher footfalls due to rising tourist arrivals.

Orchard prime retail rents reached S$35.64 psf, rising 1.2 per cent quarter-on-quarter in the third quarter of 2019, based on a basket of prime retail malls tracked by Cushman & Wakefield Research. Other City Area rents also rose 0.3 per cent quarter-on-quarter to reach $21.69 psf while suburban rents remained flat at S$31.71 psf.

Although the macro challenges for brick-and-mortar retail scene remain, Singapore continues to be the destination for international brands to maintain a physical presence given its pre-eminent financial and business hub. Singapore Grand Prix, the annual Formula One night race held in September this year attracted a total of 268,000 fans, the second highest attendance since the inaugural race in 2008. This could possibly give the retail sales figure a boost in Q3 2019.

Athleisure retailers have been expanding steadily in Singapore. For example, Foot Locker, an athleisure footwear retailer took up more than 5,000 sf of space at the newly opened PLQ Mall, their fifth store since opening their first outlet in 2018. JD Sports also recently opened their third store at Funan, taking up 2,788 sf of space. The expansion of athleisure retailers is expected to continue as the athleisure wear market is poised to expand by nine per cent worldwide in 2019. This market is set to outperform the global clothing and footwear market beyond 2023, according to analytics firm GlobalData.

Moving forward, although the appreciable deterioration in the economy and the threat of a recession on the horizon have not resulted a collapse in retail demand to date, many retailers are grappling with high operating environment and declining revenue. Retail landlords should offer greater flexibility to prospective tenants in terms of effective rental rates and shorter-lease terms to minimise vacancy risks.

The underlying demand for retail is still weak in view of the potential downsize risks in the near term. The pace of retail leasing could not be sustained if the expectations between landlords and retailers widen further. Interestingly, large department stores above ground floors in shopping centres are making way for flexible office operators who have the appetite to absorb much space to gain market share.

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Singapore REIT Fundamental Analysis Comparison Table – 8 October 2019

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Author: Marubozu

Technical Analysis of FTSE ST REIT Index (FSTAS8670)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) is currently trading in a Symmetrial Triangle consolidation pattern on an uptrend. The REIT index has little change from 927.94 to 929.69 (+0.19%). So far 50D SMA proves to be a good support.  Previous chart on FTSE ST REIT index can be found in the last post Singapore REIT Fundamental Comparison Table on Sep 6, 2019.

Based on the current chart pattern and and momentum,  the sentiment is BULLISH and the trend for Singapore REIT direction is still UPBreaking out from a symmetrical triangle will send the REIT index to march towards the minimum target of 970.

 

Fundamental Analysis of 41 Singapore REITs

The following is the compilation of 41 REITs in Singapore with colour coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio. This gives investors a quick glance of which REITs are attractive enough to have an in-depth analysis. DPU Yield for Eagle Hospitality Trust and Prime US REIT are  projection based on the IPO prospectus.  OUE Hospitality Trust is removed after merged into OUE Commercial REIT. Lendlease Global Commercial REIT is not included in this table.

  • Price/NAV increases from 1.06 to 1.07 (Singapore Overall REIT sector is over value now).
  • Distribution Yield reduced from 6.37% to 6.27% (take note that this is lagging number). About 29.3% of Singapore REITs (12 out of 41) have Distribution Yield > 7%.
  • Gearing Ratio reduced from 34.7% to 34.6%.  23 out of 41 have Gearing Ratio more than 35%. In general, Singapore REITs sector gearing ratio is healthy. Note: The current limit of gearing ratio for REITs listed in Singapore Stock Exchange is 45% but there is a consultation paper by SGX to review the potential increase to 50-55% limit.
  • The most overvalue REIT is Keppel DC REIT (Price/NAV = 1.80), followed by Parkway Life (Price/NAV = 1.71), Ascendas REIT (Price/NAV = 1.50), Mapletree Industrial Trust (Price/NAV = 1.60), Mapletree Logistic Trust (Price/NAV = 1.38), Frasers Logistic & Industrial Trust (Price/NAV = 1.38), Frasers Centrepoint Trust (Price/NAV=1.30) and Mapletree Commercial Trust (Price/NAV = 1.47)
  • The most undervalue (base on NAV) is Fortune REIT (Price/NAV = 0.53), followed by OUE Comm REIT (Price/NAV = 0.75), Far East Hospitality Trust (Price/NAV = 0.79), Lippo Malls Indonesia Retail Trust (Price/NAV = 0.77) and Eagle Hospitality Trust (Price/NAV = 0.77)
  • The Highest Distribution Yield (TTM) is SoilBuild BizREIT (9.66%), followed by Eagle HT (9.41%), Sasseur REIT (8.56%), EC World REIT (8.42%), Lippo Mall Indonesia Retail Trust (8.43%),  First REIT (8.43%) and Cache Logistic Trust (8.02%).
  • The Highest Gearing Ratio are Far East HTrust (39.8%), ESR REIT (39%),  OUE Comm REIT (39.3%) and SoilBuild BizREIT  (39.4%)
  • Top 5 REITs with biggest market capitalisation are Ascendas REIT ($9.59B), CapitaMall Trust ($9.51B), Capitaland Commercial Trust ($7.69B), Mapletree Commercial Trust ($6.77B) and Mapletree Logistic Trust ($5.85B)
  • The bottom 3 REITs with smallest market capitalisation are BHG Retail REIT ($345M), Sabana REIT ($469M) and iREIT Global REIT ($490M)

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. To learn how to use the table and make investing decision, Sign up next REIT Investing Workshop here to learn how to choose a fundamentally strong REIT for long term investing for passive income generation.

 

  • 1 month decreases from 1.87916% to 1.87633%
  • 3 month increases from 1.87933% to 1.87958%
  • 6 month stays at 1.93842%
  • 12 month stays at 2.12400%

 

Summary

Fundamentally the whole Singapore REITs is over value now based on simple average on the Price/NAV. The big cap REITs are getting quite expensive and the distribution yield are not attractive historically and most of the DPU yield for big cap REIT is below 5% now. This is the first time in my REIT investing journey seeing the distribution yield for Singapore REITs such as Mapletree Commercial Trust and Keppel DC REIT drop below 4%! However, the yield remains attractive compared to other fixed income asset classes like corporate bonds and government bonds.

The yield spread between big cap and small cap REIT remains wide. This indicates value picks only in small and medium cap REITs.

Yield spread (reference to 10 year Singapore government bond of 1.657%) has tightened from 4.665% to 4.613%.  The risk premium for small cap REIT is very attractive as compared to big cap REITs.

 

Technically, the REIT index continues the bullish uptrend and currently taking a pause. REIT index continues to outperform STI and the financial sectors due to the following 3 macro factors (1) low interest rate environment (2) potential relax of gearing ratio to 50-55% limit (3) TINA (There Is No Alternative) for other high yield asset classes. The positive sentiment may entice Singapore REITs to take on more debt to grow the current portfolio.

 

My next Singapore REIT investing course is planned on Nov 30, 2019 (last class in 2019). Registration detail can be found at following link. http://mystocksinvesting.com/course/singapore-reits-investing/