Singapore’s Real Estate Investment Trusts (REITs) are navigating a challenging financial landscape as the rate hike cycle begins from a more restrictive base, according to a recent report by DBS. The report, released on 23 September 2026, indicates that the current cycle involves smaller increments compared to the sharp tightening experienced between 2022 and 2024.
DBS notes that refinancing risks are mitigated, with approximately 75% of debt hedged or fixed. Additionally, upcoming maturities are increasingly replacing debt acquired at peak rates during 2022 and 2023. This strategic hedging is expected to provide some stability amidst the fluctuating interest rates.
However, the report warns that higher rates necessitate a valuation reset. Revised Weighted Average Cost of Capital (WACC) assumptions have led to target price cuts by approximately 9-6%, with downgrades to CDL Hospitality Trusts (CDLHT) and Far East Hospitality Trust (FEHT).
Despite these challenges, DBS favours Singapore REITs that demonstrate relative certainty of growth and possess value-unlocking catalysts. This preference highlights the importance of strategic positioning and growth potential in the current economic climate.
The report underscores the need for investors to remain vigilant and consider the implications of ongoing rate adjustments on their portfolios. As the financial landscape continues to evolve, the ability to adapt and identify growth opportunities will be crucial for REITs in Singapore.
