Singapore’s real estate investment trust (Reit) market has become the biggest in Asia outside Japan, Minister for Trade and Industry Lim Hng Kiang said yesterday.

Singapore’s Reit market has grown since the first such trust was listed here five years ago, and there are now 16 Reits with a total market capitalisation of $26 billion listed, Mr Lim said in a speech to a property conference. This makes Singapore Asia’s largest Reit market after Japan, he said.

‘Singapore Reits offer investors access to a diversity of real estate assets including retail malls, office buildings, industrial properties and serviced apartments,’ he said.

In 2006, Singapore saw its first dedicated hotel Reit as well as Asia’s first healthcare Reit.

Mr Lim said there was still room for the Reit market in Singapore to grow.While the market capitalisation of Reits in Asia has grown from US$40 billion in 2005 to US$63 billion in 2006, estimates suggest that the current market only represents 4 per cent of investible-grade real estate in Asia - whereas for Australia, estimates lie in the region of 50-60 per cent.

Mr Lim said: ‘This suggests immense potential for increased securitisation of Asian real estate assets, and for diversification beyond the conventional types of properties.’ He singled out the property derivatives market as a ‘potentially exciting area for innovation’.

These tradeable derivatives allow property companies, asset managers, banks and investors to hedge their property exposure according to their views on the market.

For the property derivative market to grow here, there must be transparent, reliable and well followed direct property indices to serve as benchmarks for structuring property derivative products, Mr Lim said. Given such prospects, industry players are now studying the construction of property indices based on the
Singapore property market, Mr Lim said.

He said the introduction of these indices would enhance information on Singapore’s property market and provide benchmarks for structuring property derivatives and other investment products.

Source: The Business Times, 24 April 2007