AN ANALYSIS OF REAL ESTATE INVESTMENT TRUST (REIT) AND PROPERTY STOCKS IN SINGAPORE CONTEXT

Abstract

There are two types of real estate backed securities in Singapore namely Real Estate Investment Trust (REIT) and the stocks of listed property companies. This study aims to explore the differences between the two assets in the dimensions of investment performance, valuation of stocks in the market, asset structure, capital structure and dividend yield. The asset and capital structure of REITs differ significantly from that of property stocks. The analysis conducted showed that the three REITs actually outperformed property stocks and the market benchmarks using total returns and risk-adjusted returns. In addition, the dividend yield of REITs also surpasses that of property stocks at the same time showing strong share price returns. The analysis concludes that Singapore REITs are not property stocks, and should be classified separately. The low correlation of returns of the two assets further confirms the divergence in their characteristics. Low correlations of REITs and the equity market makes investment in REITs a viable tool for portfolio diversification. The findings and results of this research paper hope to highlight the differences between REITs and property stocks so that investors can make informed decisions when creating their portfolio and maximize their risk-return profile while optimizing benefits provided by REITs.