Singapore’s real estate investment trusts (REITs) are expected to see improved distribution per unit (DPU) in the second quarter of 2025, driven by lower interest rates and strong fundamentals. This comes as the demand for yields intensifies, with risk-free returns continuing to decline. The report suggests that Singapore REITs are reaching an inflection point, potentially leading to sequential improvements in DPU.
The report highlights that Singapore banks may face pressure on their net interest margins (NIMs). However, the wealth management sector is expected to provide a buffer, supporting overall income. Despite these challenges, the report indicates that REITs are likely to continue outperforming banks, particularly in the retail, industrial, and office sectors.
The analysis underscores the importance of focusing on banks with higher and growing yields, as they are expected to maintain their course amidst these market conditions. The ongoing demand for yields is becoming increasingly tangible, with investors seeking alternatives as traditional risk-free returns diminish.
As the financial landscape evolves, the report suggests that Singapore REITs are well-positioned to capitalise on the current economic environment. The potential for improved DPU, coupled with robust fundamentals, positions them favourably against banks in the near term. This trend is anticipated to persist, offering attractive opportunities for investors seeking yield in a low-interest-rate environment.
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