Is 2025 a Good Time to Buy Singapore REITs?

In early 2025, Singapore Real Estate Investment Trusts (S-REITs) are trading at a sector-wide Price-to-Net Asset Value (P/NAV) ratio of 0.93, a level that suggests many are undervalued relative to their underlying assets. This attractive valuation, coupled with an average dividend yield of 6.3%, positions S-REITs as a compelling option for investors seeking both income and potential capital appreciation in a low-interest-rate environment. The current market dynamics, shaped by Singapore’s stable economic outlook and global trends like the surge in demand for data centers, create a favorable backdrop for S-REIT investments. However, the decision to invest requires careful consideration of sector-specific performance, macroeconomic risks, and individual REIT fundamentals to ensure alignment with long-term financial goals.

The low interest rate environment in Singapore as of April 2025 significantly enhances the appeal of S-REITs. The 10-year government bond yield hovers at 2.74%, and the 3-month Singapore Interbank Offered Rate (SIBOR) was recorded at 3.30% in late 2024. The Monetary Authority of Singapore (MAS) has adopted a slightly dovish stance, adjusting the slope of the S$ Nominal Effective Exchange Rate (S$NEER) policy band downward in January 2025, signaling a cautious easing of monetary policy. This environment reduces borrowing costs for REITs, which often rely on debt to finance property acquisitions, thereby boosting their net income and ability to sustain high dividend payouts. For investors, the 6.3% average yield offered by S-REITs starkly contrasts with fixed-income alternatives, such as fixed deposits yielding around 2.9% or Singapore Savings Bonds with rates between 2.73% and 2.85%, making REITs a superior choice for income-focused portfolios.

Singapore’s economic outlook for 2025 provides a stable foundation for S-REITs, though growth is expected to moderate compared to previous years. The Ministry of Trade and Industry (MTI) projects GDP growth of 1-3% for 2025, a slowdown from the 4.4% recorded in 2024, driven by global trade uncertainties and a potential softening in external demand. Despite this, sectors such as manufacturing, particularly electronics, and trade-related services are expected to remain resilient, supporting demand for industrial and commercial properties. Core inflation is forecasted to stabilize between 1.5-2.5%, ensuring that operating costs for REITs remain manageable, which is critical for maintaining profitability and dividend sustainability.

While the S-REIT market offers significant opportunities, it is not without risks. Geopolitical tensions, particularly the potential for renewed US-China trade conflicts and tariffs under the US administration that took office in January 2025, could disrupt Singapore’s export-driven economy. Such disruptions would likely impact retail and office REITs more severely, as reduced consumer spending or corporate leasing activity could pressure occupancy and rental income. The interconnected nature of Singapore’s economy with global trade flows means that external shocks could ripple through the property market, affecting REIT performance.

Selecting the right S-REITs requires a disciplined approach, focusing on key financial and operational metrics. Dividend yield is a critical consideration, as sustainable and growing distributions are a hallmark of quality REITs. Keppel DC REIT, with a 12.28% annualized return, exemplifies strong dividend performance. Gearing ratios, which measure a REIT’s debt relative to its assets, are equally important. Most S-REITs maintain gearing levels around 30%, well below the regulatory cap of 50%. CapitaLand Ascendas REIT, with a gearing ratio of 37.9% and 79.1% of its debt hedged for 3.5 years, offers a balanced risk profile. Occupancy rates and rental growth also signal a REIT’s resilience. Mapletree Industrial Trust’s 92.9% occupancy and 10.7% rental revision rate highlight its operational strength.

​The S-REIT market is poised to benefit from several long-term trends. The global shift toward digitalization and cloud computing will continue to drive demand for data centers, positioning REITs like Keppel DC REIT and Mapletree Industrial Trust for sustained growth. Singapore’s role as a regional hub for technology, finance, and trade further strengthens the case for S-REITs, which account for over 12% of the Singapore Exchange’s total market capitalization as of August 2024. The anticipated US Federal Reserve rate cuts in 2025 could further reduce borrowing costs, enhancing REIT profitability and dividend sustainability.