Why SREITs are still hot pockets for investments

REITs hit 5-year highs.

According to Cushman & Wakefield, global announcement of macroeconomic data will continue to produce very short-term price volatility - however overall sentiment for the sector remains favourable. Average returns of approx. 6% in the REIT sector compare very favourably to say 10-Year Singapore sovereign bonds which yield approx. 2%.

There are several catalysts present in the Singapore market in 2013 which point to upside opportunity that will continue to attract investors to the sector.

Here's more from Cushman & Wakefield:

The last 12 months has seen REITs reach 5-year highs - mainly off the back of investors seeking higher returns in a low interest rate environment. This year we see market catalysts keeping REITs attractive to investors. The Asia Pacific region is predicting the highest GDP growth in the world this year, and this coupled with high employment and strong consumerism, will generate more opportunities for continued growth of Singapore REITs

Retail turnover figures remain positive, giving rise to expectations of sustained strong growth in the retail sector. Singapore hotels recorded amongst the strongest ADR growth rates from 2010-2012 and are forecasted to be largely stable thus offering high returns on hospitality REITs and business trusts. The office sector was sluggish in 2012 but has now seen two consecutive quarters of stabilized rents. Rent growth is now imminent in the CBD and Marina Bay areas meaning that office stocks will also be in favour as growth returns to the sector

John Stinson, Executive Managing Director, Capital Markets, Asia Pacific, Cushman & Wakefield Singapore comments: “Obviously the REIT sector will still be subject to short term pricing volatility as governments around the world respond to the need to stimulate their economies. If the US Federal Reserve eases Treasury bond buying it is likely to be very gradual. “Hot money” in the market continues to be replaced by re-allocation of funds from Europe by sovereign wealth funds and large global investors. These factors will continue to be favourable for the REIT market in Singapore both for investors due to the returns available and for sponsors wishing to tap the markets for equity for new vehicles or issues.”

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