Asian real estate investment trusts (Reits) have surpassed global Reits by three times in the past five years, with Malaysian Reits providing an average return of between seven and eight percent from Asia Pacific property trusts, according to Ng Chze How, director of retail funds (fund management) for AmInvestment Bank.
“Malaysia indices give out 3.5 percent in dividends,” he said.
He noted that each business cycle averaged between seven and eight years, and Malaysia is in its third year of recovery.
Stewart LaBrooy, Chief Executive of Axis REIT Managers Bhd, said that Malaysia’s property values were relatively low, compared to other Reits in the region.
“We’re seeing a lot of foreign interest in our REITs recently. This is mainly due to a fear of inflation and the huge amounts of liquidity out there. In Malaysia, our problem is size and liquidity. Size is a huge consideration for foreign funds. It would be good to see more REITs in our market. We are seeing people moving into physical assets to protect their wealth,” he said.
“More importantly, it’s a great way to fight inflation,” he added.
To date, he said that there are RM280 billion in fixed deposits in Malaysia, with around RM80 billion in its savings account. However, this huge amount of money is sitting idle and being eaten up by inflation.
“Let’s say you have RM1 million in fixed deposits. This will yield you RM27,000 per year. With inflation going at 3.5 percent, your RM1 million will be worth RM965,000. So theoretically, by leaving your money in the FD, you have a net loss of RM8,000,” Labrooy said.
“Whereas, putting that RM1 million in a REIT stock will yield about RM80,000 a year (RM72,000 after tax). With inflation at 3.5 percent, your portfolio could be worth RM1.035 million upon revaluation. Thus, the total gain is effectively RM72,000 plus RM35,000, which is RM107,000.”
To contact the journalist, you may send your message to editor@propertyguru.com.sg