Growth-led inflation a boon to Reits: Expert

Growth-led inflation a boon to Reits: Expert

Real estate investment trusts (Reits) in Singapore and the region will keep doing well in an environment of growth-led inflation.

The recent popularity of Reits here reflects strong property market fundamentals, said Mr Patrick Sumner, head of property equities at Henderson Global Investors, in an interview with The Sunday Times.

He expects this positive picture to continue.

"Reits tend to do pretty well during periods of inflation, and will continue to do well in a growing economy where inflation is led by growth," he said.

Reits are funds that operate in a similar manner to unit trusts. But unlike unit trusts, which invest in shares, Reits specialise in income-generating real estate assets such as shopping malls, offices and industrial buildings.

They have become a sought-after investment in the current low-interest rate environment, with the additional lure of high dividend payouts.

While Singapore is "quite a volatile market" for Reits, Mr Sumner said the average dividend yield of 5.5 per cent "fairly reflects the underlying risk in real estate, and the prospective growth".

The veteran fund manager, whose team has US$2.3 billion (S$2.9 billion) in assets under management globally, added that Singapore Reits are still valuable relative to other asset classes.

"The spread of as much as 4.5 percentage points versus government bonds is an all-time high, and this gives investors quite a lot of comfort," he said.

He offered a bullish outlook for global property markets.

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