Better Buy: Singapore REITs vs. Malaysia REITs

April 6, 2023

For investors in Asia, real estate investment trusts (REITs) are popular investment vehicles that allow investors to gain exposure to the property market.

It’s also an investment vehicle that has found interest among both institutional and retail investors here in Singapore.

Among some of the reasons why REITs have been gaining popularity in recent years are the steady passive income streams through regular dividend distributions, diversification into various property sectors, liquidity, a hedge against inflation, capital appreciation opportunities and tax advantages.

In this article, I’ll compare both Singapore REITs (S-REITs) and Malaysia REITs (M-REITs) and see which set of REITs is the better buy right now.

1. Market maturity

The S-REIT market is more established, developed and mature when compared to the M-REIT market.

Since the first S-REIT was listed in 2002, the industry has undergone substantial development, expanding to include more than 40 publicly-traded REITs with a total market capitalisation of over S$100 billion.

Meanwhile, the M-REIT market has struggled to gain momentum since its launch in 2005, with fewer than 20 listed REITs and a market capitalisation of around RM 50 billion (S$15 billion).

This maturity translates into more opportunities for diversification and better liquidity for investors in the S-REIT market.

Furthermore, the larger market size in Singapore allows for better price discovery and risk management for investors.

Winner: S-REITs

2. Regulatory environment

Singapore’s regulatory framework governing REITs is more conducive to growth and investment compared to Malaysia’s.

The Monetary Authority of Singapore (MAS) has implemented a supportive and transparent regulatory environment that ensures the stability and growth of S-REITs.

It includes tax transparency, lower gearing limits, and clear reporting requirements, which provide investors with a higher degree of confidence and protection.

On the other hand, Malaysia’s regulatory environment is perceived to be less investor friendly. For example, the withholding tax is at 10% even if the investor is a Malaysia resident.

The Securities Commission of Malaysia (SC) has made attempts to improve the M-REIT landscape, but the lack of tax incentives and a less-transparent regulatory framework have hindered its growth.

Winner: S-REITs

3. Market performance

S-REITs have consistently outperformed M-REITs in terms of total returns, dividend yields, and capital appreciation.

Over the past decade, S-REITs have delivered an average annual return of approximately 7%, whereas M-REITs have offered a return of around between 5% to 6%.

The higher returns can be attributed to the more geographically diverse property portfolios, better-quality assets, and stronger management teams in the S-REIT market.

Additionally, Singapore’s stable economy, low-interest-rate environment, and strong currency have bolstered the performance of S-REITs.

Currently, S-REITs’ average distribution yield stands at 7.6%, which is higher than the average distribution yield of 6.5% for M-REITs.

Winner: S-REITs

4. Global investor appeal

The strong corporate governance, transparent regulatory framework and globally-recognised listing standards in Singapore also appeal to international investors when compared to Malaysia.

This helps S-REITs attract a higher number of international investors to invest in the market as compared to M-REITs.

Singapore’s status as a leading financial hub in Asia also attracts a larger pool of foreign investors, boosting the demand for S-REITs.

Winner: S-REITs

Singapore’s REITs have a superior track record

Overall, it’s clear that Singapore REITs have the upper hand over Malaysian REITs due to factors such as market maturity, a conducive regulatory environment, stronger market performance, and greater global investor appeal.

Investors seeking stable income and exposure to quality real estate assets in Asia should consider adding S-REITs to their portfolios for diversification and potential capital appreciation.

Meanwhile, M-REITs may offer investment opportunities, but they currently fall short in comparison to the more attractive S-REIT market.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.

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