Investors should opt for cheap developer stocks over REIT shares next year, advised UOB Kay Hian in a media report.
The Singapore-based firm explained that while the property sector will benefit once prices stabilise, REITs may be at risk once the US Fed raises interest rates.
Developer share prices are likely to re-rate once indications are that property prices are unlikely to correct by more than 10 to 15 percent on average.
“We think investors have over-discounted the expected fall in physical residential property prices (of up to 40-50 percent) as share price discounts to RNAVs have expanded to 41 percent,” noted the report.
Meanwhile, S-REITs may not fare well once interest rates climb.
As such, UOB Kay Hian advises investors to focus on hospitality and office REITS, while staying cautious of industrial REITs.
Romesh Navaratnarajah, Singapore Editor of PropertyGuru Group, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
