"We interpret the move as slightly dovish and mildly positive for the sector. While the sector has been rebounding back and up around 16% year-to-date, it's still 26% below the 2021 peak and is also a laggard compared to other major regional REIT regimes such as Australia and Japan," says Vijay Natarajan, vice president, REITs and real estate, RHB Bank Singapore.
Three-month Sora, the local Singapore benchmark rate adopted by real estate and REITs for their borrowing, has been declining since the start of the year falling by about 150bps year to date to 1.5% while 10-year Singapore government bond yields have declined by around 113bps to 1.77%.
This augurs well for Singapore dollar interest costs and capitalisation rates for Singapore-centric REITs, the positive effects of which have yet to fully flow through and will start to become more prominent in 2026, Natarajan points out.
"Operationally, we have seen minimal impact across segments from tariffs so far but based on current tariff regimes we believe the impact on the Singapore real estate sector will be slightly positive due to Singapore’s policy stability, neutrality and relatively lower tariff rates compared to other Asean countries," Natarajan says.
"Overall, we would recommend to remain overweight on sreits with attractive yields of c.6% and yield spreads of >400bps. Our preference would be a balanced portfolio with 70% singapore centric large caps providing yield stability blended with 30% alpha picks in mid caps and overseas reits to ride on the upside," Natarajan concludes.
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RHB's top large-cap pick are CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, Suntec REIT and Frasers Centrepoint Trust.
Its mid-cap picks are AIMS APAC REIT, Starhill Global REIT and ESR-REIT; and its alpha picks are Stoneweg Europe Stapled Trust, Prime US REIT and IREIT Global.
