What Investors Need to Know!

Real Estate Investment Trusts (REITs) pool money from investors like you and me to invest in a portfolio of income-generating real estate assets. 

Such assets can range from shopping centres to industrial buildings.

In exchange for our investment in a REIT, we are entitled to distributions at regular intervals, usually on a quarterly basis.

Regardless of market conditions, S-REITs remain a favourite among investors. Representing a major portion of Singapore’s listed stocks, the S-REIT sector provides extensive international exposure, with more than 90% of assets based overseas. In the third quarter of 2024, the iEdge S-REIT index achieved total returns of 17.4%, surpassing the benchmark Straits Times Index (STI) and some major US equity indices:

There are two main ways to get exposure to the REIT market.

One is by investing in individual REITs, and the other is by buying REIT Exchange-Traded Funds (ETFs) which is more accessible. 

Here’s all you need to know about the Singapore REIT ETFs!

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TL;DR: Singapore REITs ETFs Guide (2024 / 25) — Best Singapore REIT ETF

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own shares in any companies mentioned. Information is accurate as of 20 December 2024.

SG REITs ETF: Click to Teleport

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REIT ETF Investment Singapore Guide: What Are REIT ETFs? 

ETF is an investment that tracks the performance of an underlying asset.

In this case, a REIT ETF tracks the performance of a specific REIT index. Here in Singapore, there are five Singapore REIT ETFs which are tracking different indices.

S-REIT ETF List

The REIT ETFs listed in our city-state are:

1. Phillip SGX APAC Dividend Leaders REIT ETF (SGX: BYJ) (SGX: BYI)
2. NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA) (SGX: COI)
3. Lion-Phillip S-REIT ETF (SGX: CLR)
4. CSOP iEdge S-REIT Leaders Index ETF (SGX: SRT) (SGX: SRU)
5. UOB APAC Green REIT ETF (SGX: GRN) (SGX: GRE)

More on the REIT ETFs later, but first…

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Why REITs ETFs? Tracking Best REIT Singapore Index Funds

There are four main benefits of investing in REIT ETFs:

• Instant diversification — REIT ETFs allow investors to own a portfolio of REITs in different sectors with a click of a button.
• Passive — Investors don’t have to pick and monitor individual REITs, so buying REIT ETFs is an excellent option for time-starved investors.
• Low cost — Since investors don’t have to purchase different REITs one by one, they save on commission costs that they would have incurred otherwise.
• Professional management — REIT ETFs are also professionally managed where there’s automatic rebalancing and corporate actions, such as rights issues, are taken care of on behalf of unitholders.

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Phillip SGX APAC Dividend Leaders REIT ETF: Singapore Dividend ETF via REITs

Of the five REIT ETFs, Phillip SGX APAC Dividend Leaders REIT ETF is the oldest, having been listed on 20 October 2016.

It is also the first-ever ETF focusing on Asia Pacific REITs.

This ETF follows a smart beta strategy that ranks and weights the underlying REITs according to total dividends paid in the last 12 months, with the aim of enhancing returns above that of traditional market-cap-weighted ETFs.

Phillip SGX APAC Dividend Leaders REIT ETF tracks the iEdge APAC ex-Japan Dividend Leaders REIT Index.

Regarding geographical allocation, most of the REITs in the ETF are concentrated in Australia, followed by Singapore and Hong Kong.

With regards to the REIT sector allocation, diversified REITs (30.80%) take up most of the ETF, followed by Retail REITs (37.93%) and Industrial REITs (12.47%):

The following table shows the top 10 constituents of Phillip SGX APAC Dividend Leaders REIT ETF (data as of 30 June 2023):

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NikkoAM-StraitsTrading Asia Ex Japan REIT ETF

NikkoAM-StraitsTrading Asia Ex Japan REIT ETF is the world’s first Asia ex-Japan REIT ETF, and it tracks the FTSE EPRA Nareit Asia ex Japan Net Total Return REIT Index. 

Most of the REITs in the ETF are concentrated in Singapore and Hong Kong.

In terms of REIT industry allocation, retail REITs take up around 38.3% of the ETF, followed by industrial REITs (28.5%) and office REITs (13.9%): 

The following table shows the top 10 constituents of NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (data as of 31 October 2024):

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Lion-Phillip S-REIT ETF

Lion-Phillip S-REIT ETF is Singapore’s first ETF dedicated entirely to Singapore REITs.

This REIT ETF tracks the performance of Morningstar’s Singapore REIT Yield Focus Index.

The index is one of Morningstar’s strategic beta indexes that uses a proprietary three-factor rules-based investment methodology that emphasises 1) business quality, 2) financial health and 3) dividend yield.

Industrial REITs make up most of Lion-Phillip S-REIT ETF’s sector allocation (39.83%), followed by Retail REITs (16.72%) and Office REITs at 14.17%. 

The following pie chart shows the breakdown of the different REIT sectors in Lion-Phillip S-REIT ETF:

Lion-Phillip S-REIT ETF contains high-quality Singapore REITs, and the weight of each REIT is capped at 10%.

As of end-November 2024, the top 10 constituents of the Lion-Phillip S-REIT ETF were:

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CSOP iEdge S-REIT Leaders Index ETF

The CSOP iEdge S-REIT Leaders Index ETF has an investment objective to replicate as closely as possible, before fees and expenses, the performance of the iEdge S-REIT Leaders Index.

Like the Lion-Phillip S-REIT ETF, the CSOP iEdge S-REIT Leaders Index ETF only focuses on Singapore-listed REITs. 

Currently, take up most of CSOP iEdge S-REIT Leaders Index ETF’s allocation as follows: 

Here are the top 10 REITs that are part of the CSOP iEdge S-REIT Leaders Index ETF (as of 29 November 2024): 

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UOB APAC Green REIT ETF: Top REIT in Singapore?

The UOB APAC Green REIT ETF allows investors to invest in high-quality, environmentally sound real estate assets with growth potential.

The green REIT ETF aims to replicate the iEdge-UOB APAC Yield Focus Green REIT index, which contains 50 REITs listed across the Asia-Pacific region.

The index has a specific focus on yield and a weighting method that’s tilted toward the environmental attributes of real estate properties.

Here’s a breakdown of the REIT sectors for the ETF Retail REITs take up the lion’s share (38.53%), followed by Diversified REITs (28.00%) and Industrial REITs (15.36%): 

Regarding geographical breakdown, Australia takes up most of the index at 40.13%, followed by Singapore (26.61%), Japan (26.08%), and Hong Kong at 5.30%.

The table below shows the 10 largest constituents of UOB APAC Green REIT ETF as of 30 November 2024:

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REIT ETF Comparison

Here’s a quick comparison of the five REIT ETFs that we just discussed:

Potential Pitfalls of Singapore REIT ETFs

Singapore REIT ETFs are popular for their accessibility and regular income potential. But like any investment, they come with their fair share of risks. One big concern is interest rate sensitivity. When interest rates go up, the cost of borrowing for REITs increases, which can eat into their earnings and, in turn, reduce your dividends.

Another pitfall is sector concentration. Many Singapore REIT ETFs are heavily focused on commercial and retail properties. While this was a safe bet in the past, changing trends like e-commerce and remote work have impacted demand. If you’re investing in a retail or office-heavy ETF, be aware that market downturns can hit these sectors hard.

Don’t forget that dividends can fluctuate. During economic slumps or when properties face high vacancies, dividends may dip, which could throw off your income expectations. Additionally, while ETFs are meant to be cost-effective, management fees still apply and can add up over time if the fund doesn’t perform well.

Lastly, market volatility is always a factor. REIT ETFs can experience significant price swings during uncertain economic periods. So, if you’re averse to too much drama in your portfolio, make sure you’re prepared for the ups and downs.

How to Choose Singapore REIT ETFs

Picking the right REIT ETF can feel like finding the perfect kopi order – there are options, but you need to know what suits your taste. Start by looking at the underlying index the ETF tracks. The FTSE ST REIT Index and the Morningstar Singapore REIT Yield Focus Index are two popular benchmarks, but each has different sector exposures.

Next, consider the dividend yield. Higher yields are tempting, but sustainability is key. If an ETF has been paying consistent dividends, that’s a good sign. Keep an eye on the expense ratio too. Low fees (ideally below 0.6%) mean more money stays in your pocket.

Another factor is liquidity. Higher trading volumes make it easier to buy or sell without affecting the price too much. Check the ETF’s geographical exposure as well. Some ETFs focus purely on Singapore, while others include Asia-Pacific or global REITs. Diversifying beyond Singapore might help reduce risk.

Lastly, take a look at the ETF’s track record. While past performance isn’t a crystal ball for future results, it can give you an idea of how the fund has weathered market changes.

Important Considerations When Buying Singapore REIT ETFs

Before you dive into buying a Singapore REIT ETF, ask yourself: “What’s my risk tolerance?” REIT ETFs can be volatile, so make sure you’re comfortable with potential market swings. Think about your investment horizon too. If you’re in it for the short term, these ETFs might not be ideal, as property markets can take time to bounce back.

Also, consider how a REIT ETF fits into your overall portfolio diversification. If you’re already heavy on real estate, adding more exposure might increase your risk. Keep an eye on regulatory changes too – government policies on property taxes or housing could impact REIT performance.

Lastly, stay informed about broader economic trends like inflation, employment rates, and GDP growth. These factors affect the real estate market and, by extension, your ETF’s performance.

Strategies for Singapore REIT ETF Investing

So you’ve decided to invest in Singapore REIT ETFs – what’s next? A simple but effective strategy is dollar-cost averaging. By investing a fixed amount regularly, you reduce the risk of bad timing and average out your purchase costs.

Another tip is to reinvest your dividends. This helps you take advantage of compounding over time. If you’re more hands-on, you can explore sector rotation. For example, if industrial REITs are booming due to e-commerce, consider shifting some funds there.

A balanced approach is the core-satellite strategy. Have a solid REIT ETF as your core holding, then add a few individual REITs for targeted exposure. And don’t forget to monitor interest rate trends. When rates are stable or falling, REITs tend to do better, which could mean a good entry point.

How Singapore REIT ETFs Are Expected to Evolve

The Singapore REIT ETF scene isn’t static – it’s evolving, and here’s how. We’re likely to see more regional and global diversification. This means ETFs that invest beyond Singapore’s borders, reducing the risk of being too concentrated in one market.

Another big trend is the rise of ESG-focused ETFs. With growing awareness of sustainability and responsible investing, expect more REIT ETFs that consider Environmental, Social, and Governance factors.

We could also see ETFs focusing on new property sectors like data centres and logistics hubs, especially with the boom in e-commerce and tech infrastructure. Lastly, improved liquidity and ongoing regulatory support could make these ETFs even more accessible and attractive to retail investors.

Alternatives to Singapore REIT ETFs

If REIT ETFs aren’t your cup of kopi, there are other ways to invest in real estate. One option is buying individual REITs. This allows you to target specific sectors, like retail, industrial, or healthcare, depending on your outlook.

You can also consider property stocks. These companies develop and manage real estate, offering potential for capital gains. If you prefer professional management, real estate mutual funds might be a good fit. They offer more flexibility and active oversight.

For a global approach, investing in REITs from other markets like the US or Europe can help diversify your risk. Finally, if you want a lower entry cost, crowdfunded real estate platforms let you invest smaller amounts into property projects.

Singapore S REITs ETFs FAQs

Is REIT ETF a Good Investment?

Singapore REIT ETFs can be a great option if you’re looking for steady dividends, diversification, and ease of investing. They provide exposure to multiple properties with lower entry costs compared to buying individual REITs. However, they aren’t without risk – interest rate hikes, sector downturns, and market volatility can affect returns. If these factors align with your investment goals and risk appetite, REIT ETFs can be a solid addition to your portfolio.

What is the Largest Singapore REIT ETF?

The largest Singapore REIT ETF by Assets Under Management (AUM) is the NikkoAM-StraitsTrading Asia ex Japan REIT ETF. This ETF provides exposure to REITs across the Asia-Pacific region (excluding Japan) and offers a diversified way to invest in regional real estate markets.

How to Buy REIT ETFs in Singapore

Buying REIT ETFs in Singapore is straightforward. You’ll need a brokerage account – options include DBS Vickers, OCBC Securities, or online platforms like Tiger Brokers and Moomoo. For ETFs listed on the Singapore Exchange (SGX), you’ll also need a Central Depository (CDP) account linked to your brokerage.

Alternatively, consider a Regular Savings Plan (RSP) if you prefer to invest a fixed amount every month. This is a good way to get started without worrying about timing the market.

How to Buy REITs for Beginners

If you’re new to REIT investing, start by researching the different types of REITs, such as retail, industrial, and hospitality. Open a brokerage account that suits your needs and consider starting with a REIT ETF for diversification. As you gain experience, you can explore individual REITs to fine-tune your portfolio. Stay updated on market trends and remember to review your investments regularly.

Do REIT ETFs Pay Dividends?

Yes, REIT ETFs typically pay dividends, often on a quarterly or semi-annual basis. These dividends come from the rental income generated by the underlying properties. Check the ETF’s distribution policy and historical yields to get an idea of how much and how often you can expect to be paid.

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Have Burning Questions Surrounding REITs?

Then, you must check out the Investing group on Seedly and participate in the lively discussion regarding REITs and stocks:

 

Read More: Best REITs Singapore and More