Last Updated on April 14, 2021 by Chin Yi Xuan

In my previous article HERE, I have revealed my REIT dividend portfolio with the core purpose of generating passive income for me.

Since then, I have gotten a fair share of questions about Singapore REIT (SREIT), as SREITs make up around half of my stocks portfolio.

In this article, I’m going to shed some light on SREITs, and both the upside & risk of investing in them – read ahead!

 

What exactly is SREIT?

SREIT is a specific industry in Singapore, where the companies (a.k.a. REITs) own and/or manage local and global real estates.

Essentially, as an investor, imagine yourself becoming an owner of the logistic facilities in Singapore, data centers in Europe, offices in the U.S., healthcare centers in the U.K., and even the busy malls in Tier 1 cities of China (eg. Beijing, Shanghai) – and more!

SREIT is an important component of the Singapore stock market. With 42 listed REITs and a total market capitalization of around SGD100 billion, SREITs make up around 12% of the whole Singapore stock exchange. Effectively, this makes the REIT industry in Singapore the largest REIT market in Asia (excluding Japan), and is increasingly becoming an international REIT hub.

Singapore is the largest REIT hub in Asia (ex-Japan). (Source: REIT Association of Singapore)

Why Invest in SREIT?

There are many reasons to like and invest in SREITs. In this section, I am going to list several factors that make SREITs an excellent option, especially for investors looking to build a reliable passive income stream from the stock market (and real estate).

#1 Attractive Dividend Yield + Favorable Taxation Environment

Generally, one of the main reasons why investors invest in REITs is due to its higher than average dividend yield. The same thing applies to SREITs as well.

For 2019 & 2020, the average dividend yield for SREITs is around 6.2% and 7.2% respectively. 

Remember, this dividend yield number has yet to account for capital gain. Combined, SREIT can be an appealing choice for investors looking to build a passive income portfolio from the stock market.

SREIT yield vs other asset classes. (Source: REIT Association of Singapore)

 

The supportive taxation environment is where SREIT truly shines compared to other REIT markets in the world.

In general, SREITs pay out at least 90% of their taxable income. Doing so allow them to qualify for tax transparency, which essentially means SREITs are not taxed on income distributed (a.k.a. dividend) to its unitholders.

For everyday SREIT investors (like you and me), this means that there is 0% withholding tax for dividends that are being paid to us. As an example, if an SREIT announces an SGD 0.05/unit of dividend payout, investors get paid exactly the amount of the payout.

On the contrary, there is withholding tax for dividend payouts from REITs in the US (30%), UK (20%), and Japan (15%). This means that the dividends payouts are taxed with its respective rates before it reaches the investors.

No withholding tax is charged on retail investors. (Source: Capitaland Retail China Trust Earnings Report)

#2 Global Exposure to Quality Real Estates & Sector Diversification

The SREIT market also allows investors to have a very respectable exposure to the global real estate scene.

To be precise, over 85% of SREITs own and/or manage properties outside Singapore.

Source: REIT Association of Singapore

 

In addition, within the SREIT industry itself, there are REITs that focus on various business sectors. As an example:

  • Retail REIT: Mapletree Commercial Trust (N2IU) owns Vivocity, the biggest mall in Singapore; CapitaLand Retail China Trust (AU8U) mainly owns malls in Tier 1 cities in China (eg. Beijing).
  • Specialized REIT: Keppel DC REIT (AJBU) owns data centers around the globe.
  • Office REIT: Manulife US Trust (BT0U) owns office buildings in the US.
  • Industrial REIT: Ascendas REIT (A17U) owns logistics and industrial properties in Singapore, UK, Australia, and more.
  • Aside from that, there are also Healthcare, Hospitality, Residential and Diversified REITs as well. For more details, click HERE.

All in all, as an international REIT hub, SREIT allows investors exposure to quality global real estates, with the option to diversify their REIT investments across different sectors – neat!

SREIT allows diversification in various business segments. (Source: REIT Association of Singapore)

 

Read Also: 6 Types of REITs and why knowing this is important!

#3 Grow Your Passive Income in Foreign Currencies

Since the early 2000s, SGD has strengthened against the USD over the long-term, as shown below:

Since most SREITs pay out dividends in SGD*, SREITs are an amazing choice for investors looking to hedge against the weakness of other currencies. (*Some SREITs such as Manulife US Trust are listed in USD and hence pays out dividends in USD)

SGD has also been strengthening against USD in the long-run.

Things You Need to Know Before Investing in SREIT

While I genuinely think that SREIT is a good overall market to be in, I think there are a few things that investors have to consider before jumping right in:

#1 Building Confidence in Foreign-listed Companies  

Unlike investing in locally listed companies, investors may initially find it hard to familiarize themselves with foreign-listed companies.

This is particularly true for REITs. When I was researching about Mapletree Commercial Trust (they own Vivocity, the largest mall in Singapore), I find it uncomfortable at first (even with all the numbers & ratios) as I have never been to Vivocity myself.

Heck, the last time I ever been to Singapore was in 2011 during a high-school trip.

As such, it’ll take more thorough research (hence more time) for an investor to gain the conviction needed to invest in any particular SREIT.

Vivocity is the largest mall in Singapore, easily reachable via public transport.

#2 Getting Familiar with SREIT’s Reporting Style

The next challenge that investors may face is a slightly comprehensive reporting style by SREITs during their research.

In general, SREITs reveal more details in their earnings report compared to what I am used to. At first, I was a little overwhelmed by the number of details where I had to spend extra time to filter through what’s important for my research.

Secondly, since SREIT is a much bigger market with involvements in business segments not found in other REIT market, there are also business jargons that I have to pick-up along the way.

In short, there is a minor learning curve here that investors will need to overcome.

Read also: My REIT Passive Income Portfolio – Revealed!

The REITs that make up my overall stock portfolio. (Click to enlarge)

#3 Capital Size

In my opinion, anyone that’s looking to invest in the foreign stock market (SG, US, HK etc) should have a healthy capital in place before doing so.

If all you have is a few hundred extra to spare, a better option would be using robo-advisors like StashAway and Wahed to gain international exposure (p.s. I use them as well).

Reason being, even with brokers’ low commission offering nowadays, the foreign exchange process and fees by our local banks or other related remittance services could still take up a good chunk of your capital before it reaches your overseas stockbroker.

So, do consider saving at least a healthy 4 figure before getting involved in the foreign stock market.

Read also: 5 things that I look for when investing in REITs!


How to Invest in SREIT?

Personally, I invest in SREITs via my go-to broker for overseas stocks – Tiger Brokers.

Within the region, Tiger Brokers is a well-regulated broker by the Monetary Authority of Singapore (MAS), with a Capital Markets Services License to operate a legal brokerage business. Globally, Tiger Brokers is also regulated by the respective authorities from the US (SEC), Australia (ASIC), and New Zealand (FSPR) as well.

Aside from the Singapore stock market, Tiger Brokers also allows investors to invest in the US, Hong Kong, Australia, and China stock market. Coupled with its low commission structure, this makes Tiger Brokers one of the most versatile overseas stockbrokers around.

You can read my in-depth review of Tiger Brokers HERE and HERE.

Tiger Brokers is my go-to stockbroker to invest overseas.

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Keen to open a Tiger Brokers account?

Planning to open a Tiger Brokers account? Hit me up via FB messenger HERE, or via email ([email protected]) for referral link to enjoy account opening rewards!

Doing so will help support this blog, while entitling you to multiple account-opening rewards.  

Until 31/12/2021, Tiger Brokers will be running a No Minimum Commission promo for Singapore stocks. This means that the minimum commission requirement of SGD 2.88 (~RM9) will be lifted and only the 0.08% commission rate will apply.

Simply put, assuming you are buying into a stock worth SGD500, your commission paid to Tiger Brokers would be:

  • SGD 0.40 (SGD500*0.08%) during promotional period (ending 31/12/2021).
  • SGD 2.88 after the promotional period (which to be fair, is still the most affordable in the industry).

For me, Tiger Brokers is a no-brainer since I have been looking around for an affordable way to invest in Singapore REITs with the intention to expand my portfolio.

 


No Money Lah’s Verdict

So here you go – a detailed introduction to Singapore REIT (SREIT) and why I am personally investing in SREITs!

With SREITs taking up around 56% of my stock portfolio, I am certainly looking forward to sharing more related topics. In the near future, I will shed more insights on the SREITs that I am personally investing in – so be sure to wait for that!

Do you have any questions on SREITs or REIT as a whole? Feel free to let me know in the comment section below!

Keen to build a reliable passive income foundation from the stock market?

If you are keen to learn how to invest in REITs for passive income, I organize REIT Investing Sharing Session where I go through the basics AND fundamentals of REIT investing, step-by-step. Click HERE for more info!

 


p.s. This article produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Information in this article is accurate as of the time of production. Please consult a licensed financial planner before making any investment decisions.

p.p.s. This post contains affiliate link(s). As always, I’d only recommend tools and financial solutions that I personally use AND/OR are interesting & provide unique value to my readers. Every article takes a long time and effort to write and when it comes to financial solutions, I’ll only invest time in writing about good and relevant solutions.