THE current market optimism over real estate investment trusts (Reits) could be misplaced, said Nomura analyst Sai Min Chow in a Monday report.
Mr Sai prefers CapitaLand, City Developments, UOL Group, Global Logistic Properties, and just one Reit - CapitaMall Trust - for 2015.
While giving a caveat that most of its calls on fat-tailed risks in the property sector last year were wrong, Nomura said that it is purposely trying to identify non-consensus ideas that have an above-average risk-to-reward ratio.
One surprise it is calling for this year is for cooling measures to be relaxed as mortgage rates continue to climb.
Another is for the 10-year Singapore government bond yield to rise above 2.5 per cent by end-2015 from 1.94 per cent now, and Reits to fall 10 per cent in response.
The third surprise could be that tax incentives currently enjoyed by Reits will not be extended beyond March, when they expire.
The fourth surprise is for office rents to decline due to the deteriorating outlook for the financial services and energy and resources industries.
The final surprise is for hotel room rates to fall 5 per cent due to a combination of increased supply and a lack of increased visitor numbers.