• Investing in Singapore REITs: A Complete Guide

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    Real estate investment trusts (abbreviated as REITs) have become increasingly popular in Singapore over the past two decades.

    By distributing at least 90% of the taxable incomes as dividends, the trusts can produce exceptionally high yields and cash flows for investors.

    Singapore is renowned for being the top financial center in Southeast Asia and with the biggest stock market in terms of market cap. It’s comparatively easy to set up a brokerage account and start trading REITs with global coverage.

    Yet, many Singaporeans and foreigners aren’t sure how they can start buying REITs. In this article, I explain the basics and cover the following topics:

    • Can foreigners buy REITs in Singapore?
    • How can I invest in REITs in Singapore?
    • Opening a CDP Account
    • What are the benefits of buying REITs in Singapore?
    • List of REITs in Singapore
    • The 10 Best Performing REITs in Singapore

    Can foreigners buy REITs in Singapore?

    While this article isn’t solely targeted towards foreign investors, a large size of our audience are foreigners who are interested in capitalizing on Singapore’s REIT market.

    As such, I will start and explain if and how foreigners can invest in REITs in Singapore.

    Investing in REITs is just like buying shares in global stock markets, something that most investors can do through brokers back home. You don’t necessarily have to visit Singapore to start trading REITs.

    However, buying REITS through international brokerage firms will also result in increased transaction fees.

    This might not be a problem for institutions or persons with large capital, but not bearable for individual investors who want to minimize transaction fees.

    To avoid such transaction fees, you should try to open a local brokerage account in Singapore.

    How can I invest in REITs in Singapore?

    As mentioned, foreigners generally don’t have any issues buying REITs. But, transaction fees will vary accordingly if you buy REITs through an international or local brokerage firm.

    To reduce your transaction fees, you can find brokerage accounts through the top banks, including DBS, UOB, and OCBC. Most of the banks allow foreigners to use their securities trading services.

    Just keep in mind that some banks restrict non-resident US-citizens, and sometimes South Korean-citizens from doing so.

    For more detailed information about the requirements, I recommend you to visit a handful of banks’ websites.

    Some banks such as OCBC allow foreigners to open brokerage accounts without the need of visiting Singapore if you currently have a local bank account.

    Opening a CDP Account

    To start trading, you have to set up a Central Depository (CDP) account first. In short, the Central Depository is operated by the Singapore Exchange (SGX) helps to facilitate transfers and keep your stocks instead of the broker.

    Your brokerage firm communicates your orders to the CDP who would then register the transactions.

    You can make the application for a CDP account opening via SGX’s website.

    What do I need to provide to open a CDP account?

    To open a CDP account, you have to get a local bank account first.

    Examples of banks that can help with this service include:

    • Citibank NA (Citibank)
    • DBS Bank Ltd (DBS/POSB)
    • Malayan Banking Berhad (Maybank)
    • Oversea-Chinese Banking Corporation Limited (OCBC)
    • Standard Chartered Bank (SCB)
    • The Hongkong and Shanghai Banking Corporation Limited (HSBC)
    • United Overseas Bank Limited (UOB)

    Other general requirements apply such as an age restriction of 18 years and you have to be in a stable financial condition.

    Upon submission of the application for a CDP account, you also have to provide a handful of documents to the SGX, including:

    • Passport/Residency card
    • Secondary support documents such as bank statements
    • Your bank details

    If you have any concerns or issues during the preparation or submission process, try to contact your broker for support to manage the application.

    What are the benefits of buying REITs in Singapore?

    REITs were initially launched in the US in the 1960s and didn’t exist in Singapore until 2002. Therefore, it’s a fairly new concept that many foreign investors aren’t aware of and haven’t considered.

    With that said, there are plenty of benefits of investing in REITs, especially if you’re a non-resident foreign individual that wants to overcome local buying property investment restrictions.

    1. Global market access

    REITs don’t limit you from capitalizing on Singapore’s residential and commercial real estate market. Many of the REITs have international real estate in their portfolio, a trend that’s become obvious in the past years.

    This can be illustrated by Singapore’s REIT Association (REITAS). In 2002, there were 28 REITs in Singapore and where 18 had overseas exposure and the remaining 10 in the Singapore market merely.

    By 2020, the number of REITs increased to 42, and as many as 37 had exposure to foreign markets.

    Top-performing REITs have China retail properties in their portfolio, something that explains the market exposure you can gain by investing in REIST.

    2. Overcoming buying and ownership restrictions

    If you want to profit from commercial real estate in China, you have no issues to do so through a REIT. Compare that to if you would buy real estate as a foreign individual.

    First, you have to live or study in China for at least one year before you can buy one unit. Notice that I said one unit, as you are not allowed to acquire several units, nor renting them out!

    Cities like Shenzhen and Shanghai now have some of the most expensive real estate markets in the world, which makes investments virtually impossible for many foreign individuals.

    Commercial real estate is a different story as you’re not even allowed to purchase commercial real estate as a foreign individual.

    Thanks to REITs, foreigners get access to any kind of properties in developing countries, including Thailand as well.

    3. Generally high dividend yields

    REITs have offered some of the highest dividend yields and with minimal volatility which can be illustrated in an exhaustive report issued by KPMG.

    REITs offer yields ranging from around 5% to 9%. This is considerably higher compared to rates provided by banks.

    4. No property or tenant management required

    While it’s fairly easy to start buying REITs, you also have to take into consideration that you won’t have to deal with property management or tenant management.

    This saves you both energy and time that can be allocated for other activities.

    A REIT cannot be damaged in the same sense as a physical property can and you will therefore worry less about outstanding rental payments or tenants that misbehave.

    5. Low startup capital & fees

    Singapore has some of the most expensive real estate markets in the world and owning a physical property is beyond the reach of many young people and foreign investors.

    You only need a few hundred dollars to start investing in REITs which makes it more accessible to persons with limited finances or that don’t want to pay hundreds of thousands of dollars upfront.

    6. Diversify your risk exposure

    REITs hold shares in our several complete units sometimes both in Singapore but also overseas. By having several units in the portfolio, you don’t put all your eggs in one basket but diversify your risk.

    This can be further extended to the investment in REIT ETFs that are so-called Exchange Traded Funds including different REITs.

    7. Tax exemptions

    Investors are subject to high taxes when buying real estate in Singapore, this is particularly the case for foreigners.

    For residential property, an Additional Buyer’s Stamp Duty (ABSD) has been imposed towards foreigners since 2018 to curb escalating property prices.

    The ABSD rate is currently 20%, which is remarkably high when considering how expensive real estate is in Singapore.

    On top of that, you have to pay a Seller’s Stamp Duty (SSD) if you sell the property within the following time-frames:

    • Holding period up to 1 year: 12%
    • 1-2 years: 8%
    • 2-3 years: 4%
    • More than 3 years: No SSD

    These taxes are not applicable to the purchases of REITs.

    8. Flexibility and liquidity

    REITs offer flexibility and liquid investment opportunities and you won’t have to deal with lengthy processes such as valuations, contractual arrangements, transfer processes of titles, visits, and more.

    9. Singapore real estate is expensive

    If you’re an individual that wants to get access to the Singaporean residential and commercial real estate market, then REITs are probably your easiest option.

    Singapore has the second-most expensive in the world, just after Hong Kong.

    Singapore’s commercial real estate market might be less crowded, competitive, and with lower taxes, but the investment amounts are not for the faint-hearted.

    These are examples of the potential benefits of investing in REITs. If you have any other interesting information on hand, feel free to drop a comment below.

    List of REITs in Singapore

    There are more than 40 REITs available in Singapore. In Vietnam, you can only find one REIT.

    Due to the great number of REITs here, I’ve selected a handful below that are some of the most interesting and popular.

    CapitaLand Integrated Commercial Trust (CICT)

    CapitaLand Integrated Commercial Trust (CICT) is the biggest and was the first REIT to be introduced on the Singaporean Exchange (SGX).

    It was previously called CapitaLand Mall Trust but changed the name to CICT in November 2020.

    The REIT has a portfolio of 22 properties in Singapore and 2 in Frankfurt with a complete value of SGD 22.4 billion as of June 30th, 2020.

    Owned by one of the top property developers in Singapore, CapitaLand, CICT is undoubtedly one of the most popular REITs.

    The REIT has been one of the best performers in the past decade.

    Mapletree Industrial Trust (MIT)

    The Mapletree Industrial Trust (MIT) was constituted as a private trust in 2008. In that same year, the trust acquired 64 properties from the JTC Corporation. The trust primarily invests in industrial real estate, as you can hear by the name.

    Since 2010, the trust has generated SGD 2,990 out of every SGD 1,000 invested. If we include dividends, the amount would reach SGD 4,000 for each SGD 1,000, which is astonishing.

    Ascendas REIT (A-REIT)

    According to the Singapore Exchange (SGX), A-REIT is the biggest and most diversified real estate investment trusts for industrial real estate and business space.

    The trust has 102 properties in Singapore, 26 properties in Australia, and 2 business park properties in China.

    The total asset value is around SGD 8.3 billion.

    A-REIT is also one of the best-performing REITs in Singapore and since 2002, every SGD 1,000 would have turned into SGD 3,580. If including dividends, the value would be SGD 6,170 for every SGD 1,000 invested.

    The 10 Best Performing REITs in Singapore

    Even if there are dozens of REITs available in Singapore, there are some that truly stand out. Below, you can find the top 10 best-performing REITs and the average annual returns as of February 2020.

    • Mapletree Industrial Trust (+14.87%)
    • ParkwayLife REIT (+10.84%)
    • Ascendas REIT (10.64%)
    • Frasers Centrepoint Trust (10.54%)
    • Mapletree Logistics Trust (+10.05%)
    • CDL Hospitality Trust (+9.19%)
    • Ascott REIT (+8.93%)
    • CapitaLand Mall Trust (+8.66%)
    • First REIT (+7.69%)
    • CapitaLand Commercial Trust (+7.64%)

    For more information, you can visit SGX’s website where all the REITs are listed including financial data.

    Just next to Singapore, you also have Malaysia, one of the most developed REITs markets in Asia. I highly recommend you to check my article about buying REITs in Malaysia as well.

    Disclosure: This information is intended for educational purposes. It does not constitute investment advice and should not be considered as a recommendation for investment. The writer of the article and the owners of the website don’t own any of the securities/REITs mentioned in the article. Note that the value and income of investments can go up, as well as down (resulting in a loss).

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