Real Estate Investment Trusts (REIT) are like bonds or fixed income investments. REITs are sensitive to movement in interest rates. It depends on low interest rates to boost its income. When general interest rates go up, REITs decline in valuations.
The Federal Reserve of US started to raise Federal Funds Rate from March 2022. It was aggressive in raising funds rate in 2022 to touch 4.25% to 4.50% by December 2022. It continued to raise funds rate in 2023. By July 2023, the final federal funds rate was 5.25% to 5.50%.
My REITs suffered heavy losses in valuation. Market valuations were based on today’s prices.
| Valuations from Costs | ||
| REITs | 31-Dec-2021 | 23-May-2024 |
| Keppel REIT | -14.3% | -34.0% |
| Paragon REIT (previously SPH REIT) | 5.6% | -9.8% |
| Lion-Phillip S-REIT ETF | 6.3% | -20.5% |
| UOB AsiaPac Green REIT ETF S$ | -2.2% | -31.3% |
The redeeming aspect is that I am still receiving dividends from these REITs, though valuations have come down quite a lot.
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