End of an era: Time to say goodbye to outperforming S-REIT stocks, investors warned

Regulatory changes could be a game changer for SREITs.

There was a time when investors could rely on real estate investment trusts (REITs) to provide high returns and steady profitability. However, analysts warn that the golden era of easy gains may soon be over.

A report by CMC Markets today highlighted that game-changing regulatory changes may be introduced to S-REITs when the Budget 2015 is unveiled on February 23.

“In view of the easy operating and tax regime that the Singapore REITS operate in, the possibility of misapplication of these rules may sometimes give the REIT managers different priorities to REIT investors. MAS is keen to prevent this, and could close the loopholes for these managers. This could be a game changer for how business is carried out for this sector and, with it, a threat to the strong price performance REIT names have enjoyed in the local market,” stated the report.

CMC Markets stressed that SREITs have provided a total annual average return of 26% including dividends. Fortune REIT has been the leader of the pack, returning 55% while Keppel REIT, the weakest amongst the sector, even managed a modest 15% annual return.

“Further out, stronger headwinds for the local REITs could come in the form of rising US interest rates. As yield investments, REITs are priced inversely to interest rates. Perhaps investors should consider taking some money off the table, locking in good profits here. Perhaps shorting is in order,” the report warned.

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