Here's why Reits/ Reit ETFs are still a Buy

All right, let's get down and dirty. EVERYTHING has risen both in price and valuations in the past few months. By everything, I am referring mainly to the traditional investment asset classes of equities and bonds. What this simply means is that you'll stay a high chance to lose money if you blindly buy now. Smart money (this refers to institutional investors like your sovereign wealth fund managers and financial institutions like your banks and insurance firms) has entered the markets, although I personally believe that the stock/ bond market has some more room to go up, as the FOMO retail investors who have been waiting for the "right opportunity to enter," will eventually lose patience and enter blindly. But that's another story for another day, I digress.

Well, nonetheless if you really have to buy something cause your money is mostly still in the bank doing shit. Here's what I would personally do and why. I'll either buy the local blue-chip Reits that have a price to book (PB) valuation of less than 1X or invest in the Nikko AM Straits Trading Asia ex Japan Reit ETF (CFA.SI). Reasons for this below.

1. Let's face it, from an equity risk premium perspective, REITs are just about the only thing left in the local market that still makes sense buying.

Taking an indicative yield of about 5.6% to 5.8% from CFA.SI, the yield spread between Reits versus the risk-free rate of the September Singapore Savings Bond (SSB) of 2.1%, this still translates to a more than 3% yield spread. Personally, for me, this is still acceptable. Although, I would not enter the market now with CFA.SI being around $0.82 per share. I had already accumulated aggressively (mostly at the start of 2025) when it was around $0.76 as that offered a dividend yield of slightly above 6% which made more sense to me. Not trying to pour cold water on anyone, but if you really have to fire a shot at something, CFA.SI still makes sense due to the more than 3% yield spread.

2. Valuation of some blue-chip Reit Reits and Reit ETF are still under book value, with some room to go up even further.

Based on my background, I'm not a financial guru, neither do I claim to be one. But here's why I personally predict that CFA.SI will go back to its $0.90 to $1 price range likely by year end. With the US Fed finally cutting interest rates, funds from institutional investors based in the US would seek markets which offers a higher dividend yield. This may see a 'second leg' in the recent price rally in the local Reit space, as such institutional funds enter our local Reit space. Given Singapore's reputation as a "Reit friendly" place with our generous tax incentives given to locally listed Reits/ Reit ETFs, coupled by global investor confidence in Singapore's financial market, I wouldn't be surprised at another 10%-15% price rally in the local Reit space.

On this note, I would like to caution, DO NOT BUY the non-blue-chip Reits. Just think about it, if a storm comes, would the larger ships be safer versus the little boats? That's the thing with investing, the next storm is always around the corner, you just never know when it will be exactly (those who claim they know, are probably either fools or out there to get your money one way or another by pretending to be a guru and sell you some shit like courses and what not). In short, if you have absolutely no idea wtf to buy, please just accumulate the Reit ETF and go broad-based. 

Ok, it's getting lengthy, I hope this short article would help anyone who's out there and still reads blog a clearer idea of what to invest in right now. As usual, take care and stay safe investing.

Yours sincerely,

Finance Kaya Toast

Disclosure: This article was written as me talking to myself as an ordinary Singaporean, wishing to achieve financial freedom. It does not represent any financial advise. All opinions are independent and represent just my two-cents on all matters financially-related.