ARE REITS STILL WORTH YOUR INVESTMENTS?

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I was reading what an investment analyst said at a recent Reits forum in the free daily newspapers yesterday when Reits came back to my mind. According to the analyst, local Reits have reached a saturation point in terms of growth and Reits with overseas exposure could benefit from the seemingly more growth prospects overseas. The investment analyst highlighted that the growth prospects for overseas Reits need not come at the expense of investment risk and what needs to be done is education of investors towards overseas Reits in terms of understanding risks.

In a way, I agree that the growth of local Reits is capped to Singapore small market be it in residential, industrial, retail or commercial Reits. But I do think when local Reits venture abroad, risks are inevident; inevidently due to competition with foreign counterparts and at their own turfs. Thus while local Reits have a capped growth, overseas Reits do have their fair share of market risks.

Against the aforementioned reasons, I do not invest in Reits. I know many investors are into Reits for dividends. But the fact is that while Reits are obliged to pay around 90% of their earnings as dividends, Reits are ultimately companies which are subject to market forces. Thus it is all likely that dividends from Reits will shrink. And in the current environment with increasing interest rates, Reits are not as conveted by investors.



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