The year 2025 marked a pivotal turnaround for Singapore Real Estate Investment Trusts (S-REITs). After a turbulent 2024, the sector entered a "Great Rebound," characterized by strong total returns and renewed investor confidence as global and domestic monetary policies shifted toward a more accommodative stance.
In stark contrast to the previous year's decline, 2025 witnessed some of the strongest performances since 2019.
Strong Total Returns: The benchmark iEdge S-REIT Index generated total returns of approximately 9.73% year-to-date for 2025.
Outperforming the STI: Major blue-chip REITs, including Suntec REIT and CapitaLand Integrated Commercial Trust (CICT), recorded gains of up to 23%, outperforming the broader Straits Times Index (STI) in certain quarters.
Broadening Performance: While 2024 saw widespread losses, 2025 featured standouts like Alpha Integrated REIT, which saw its unit price climb over 33.33% year-to-date.
The most critical driver for the 2025 rebound was the definitive shift in interest rate trajectories.
Lower Borrowing Costs: After years of aggressive tightening, easing interest rates in 2025 allowed REITs to proactively refinance debt, directly lowering finance costs and boosting distributions.
Yield Compression: Singapore’s 10-year government bond yield declined significantly, from 2.885% at the start of the year to 2.223% by 2025 end. This made the average REIT yield of 5.71% increasingly attractive to yield-seeking investors.
Currency Strength: The Singapore dollar appreciated roughly 6.23% against the U.S. dollar, aiding REITs with significant domestic exposure and protecting local investor returns.
As 2025 concludes, the tailwinds for S-REITs appear to be aligning for continued performance, though operational headwinds remain.
Favorable Valuation: With the sector still trading at a Price-to-Book (P/B) ratio of 0.75x—well below the pre-COVID average of 1.1x—there remains significant potential for further valuation re-rating.
Institutional Flows: As risk-free rates continue to trend downward, institutional capital is expected to flow back into the sector, providing further liquidity and price support.
Focus on Resilience: Investors are anticipated to stay focused on REITs with healthy interest coverage ratios (ICR) and disciplined leverage management.
| Exclusive REITsavvy Newsletter |