Singapore’s real estate investment trusts (S-REITs) are expected to experience growth in distributions from the financial year 2025, driven by lower refinancing costs and stable fundamentals. According to a recent analysis, the sector reached an inflection point in the second quarter of 2025, with lower short-term interest rates benefiting S-REITs, particularly those with a higher proportion of floating-rate debt. This includes names like CDL Hospitality Trusts, Frasers Centrepoint Trust, and Keppel REIT.
The report highlights that Singapore’s economy remains resilient despite global uncertainties, with a strong Singapore dollar and ample liquidity contributing to heightened demand for yield. As Treasury bill rates fall to 1.8%, investors are increasingly looking towards higher-yielding alternatives such as S-REITs and Singapore banks, which currently offer average yields exceeding 6%. This shift could result in significant capital inflows, potentially reaching SGD100bn.
Singapore banks are also expected to maintain stable earnings and high dividend yields, with yields of up to 6.5% forecasted for FY25. The banks have commenced share buybacks, which are anticipated to deliver growth for shareholders. Despite the recent dip in benchmark rates, the banks’ share prices are expected to remain supported due to benign asset quality and comparable dividend yields to S-REITs.
The report suggests that the ongoing decline in interest rates will continue to benefit S-REITs, potentially leading to revisions in previous guidance regarding higher interest rates. The sector remains attractively valued, with FY25-26 yields near 6.0% and spreads close to 4.0%. As the economic landscape evolves, both S-REITs and Singapore banks are positioned to capitalise on the changing market conditions.
“`
