Most beginners assume a REIT falls because something is wrong with the buildings. This year, that is mostly not the story. Singapore REITs are down about 8% since January while the STI has gained roughly 23%, yet the malls, data centres and logistics hubs behind these trusts are still collecting rent.

If you hold a few REITs, you have probably felt this every time you open your portfolio. The price on your screen moved, but the cash coming in did not, and that gap is the whole story right now.

A REIT is priced like a bond with a pulse. Investors compare its yield to the safest option available, the government bond. When that safe yield rises, a REIT paying the same distribution looks less special, so its price has to fall for the yield to look attractive again.

That is exactly what happened. The Fed raised rates on 16 September for the first time since 2023, and the US 10-year yield touched its highest level since 2007. Singapore's 10-year yield followed, climbing from about 1.74% a year ago to 2.61% on 28 September. Same rent, higher bar, lower price.

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Now look at what the market is offering. The sector yields roughly 6.4% on forward distributions and trades at about 0.86 times net asset value. The 6-month T-bill hit 1.70% at the 10 September auction, and the October Singapore Savings Bond averages 2.32% over ten years.

That is a gap of around 4.5 percentage points over T-bills. Gaps like this are what value investors hunt for, but a wide gap can get wider before it closes, and nobody rings a bell at the bottom.

This is not a free lunch, and the pain is not spread evenly. Office REITs fell about 12.5% in the first half of the year, and trusts carrying heavy debt feel higher rates more than the rest. Three-month compounded SORA has crept up to about 1.22% from roughly 1.0% at the end of May, so floating-rate borrowing costs are inching higher.

The helpful part is that Singapore dollar funding has been far friendlier than US headlines suggest. The checks that matter are simple: gearing, how much debt matures in the next 12 months, and whether distribution per unit is actually holding. A cheap-looking REIT that fails those three is just a cheap REIT.

With 20 years of investment expertise, Caleb Gan is a seasoned professional in stock trading. The hard work and dedication were recognized when his partner and him were featured on Singapore TV Channel 9's MoneyWeek, a prominent financial program. He's also had the privilege to share insights on radio stations like 93.8Live, Capital 95.8FM, and 96.3FM through live interviews about stock market investments. Beyond that, he's also the co-founder of NDU System, where he continues to help others navigate the world of trading.

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