If you hold Singapore REITs, you’ve probably noticed how closely their mood follows interest rates. Borrowing costs, DPU and unit prices tend to move with them. The reason? SORA interest rate. SORA determines the cost of borrowing, and for REITs, that cost feeds straight into what they can pay out.
- A higher cost of debt reduces distributable income, because more of a REIT’s revenue goes to interest payments.
SORA update for October 2026
SORA has turned upwards. The 3-month compounded SORA is around 1.23%, up from about 1.09% at the start of July. The US Federal Reserve also raised its rate in September, its first hike since July 2023. Below is where SORA is today, and why it matters for your S-REIT dividends.
My personal view, not financial advice. Some links may earn me a referral commission.
Investing involves risk, past performance doesn’t guarantee future results, and you should do your own research. While efforts are made to ensure the accuracy of content at the time of publication, I am not responsible for any errors, omissions, or outdated information.
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What Is SORA
SORA (Singapore Overnight Rate Average) is the de facto standard for floating interest rates in Singapore. Think of it as the wholesale cost of borrowing Singapore dollars overnight. Everything else prices off this.
Singapore is an open economy and the SGD is managed against a basket of currencies, so global rates pull SORA along with them. Looking at the SORA chart, it generally follows the direction of the Fed Rate over the past few years.
While SORA tends to follow the Fed’s direction, the relationship isn’t always proportional. Singapore doesn’t set interest rates the way the US does. Instead of controlling rates directly, MAS manages the Singapore dollar’s exchange rate. Local factors like SGD strength and liquidity conditions also play a role in where SORA ends up.
Key takeaway: Don’t assume the next Fed move translates 1:1 into a SORA change.
You know what SORA is. Where does it sit today?
Current SORA Rate And Outlook (Oct 2026)
As of October 2026, the 3-month compounded SORA was 1.23%, with the 1-month at 1.29% (MAS Domestic Interest Rates, value date 7 October 2026). Both are up from early July, when they were about 1.09% and 1.12%. The daily figure moved in a band of roughly 0.8% to 1.5% over the quarter.
The 1-month rate is now above the 3-month rate. That means SORA in recent weeks has been higher than its average over the past three months.
In the US, the Federal Reserve raised its rate on 16 September 2026, to a target range of 3.75% to 4.00%. That puts the Fed Rate close to 4%, while SORA is around 1.2%. A big part of that gap comes from how MAS manages the Singapore dollar, along with local factors like liquidity. It isn’t a mistake in the data.
MAS takes a different route. Instead of raising interest rates, it manages the Singapore dollar’s exchange rate. In its July 2026 policy statement, MAS let the Singapore dollar strengthen very slightly faster to keep inflation in check. That was its second tightening this year, after April.
Where do forecasters see SORA heading? I found two recent bank views. Both expect a gradual climb.
- UOB (June 2026) projects the 3-month compounded SORA at 1.42% by the fourth quarter of 2026, and 1.64% by the second quarter of 2027.
- OCBC (July 2026) projects 1.35% by the fourth quarter of 2026, and 1.48% by the third quarter of 2027.
Both came out before the Fed’s September hike. SORA ended the third quarter at around 1.23%, in line with UOB’s 1.24% forecast for that quarter and above OCBC’s 1.15%.
The common thread: SORA edging up to around 1.5% – 1.65% by mid-2027.
If these forecasts hold, REITs refinancing floating-rate debt by mid-2027 would face a SORA about 0.5% to 0.6% higher than in early 2026, when it was around 1%.
Predicting rate moves is about as reliable as predicting tomorrow’s weather, so I treat these forecasts as a rough range.
So what does this mean for REITs and their borrowing costs?
How SORA Affects REIT Borrowing Costs
Not all REITs feel a change in SORA equally or at the same speed. It comes down to three things.
1. The fixed versus floating debt ratio.
REITs can have loans tied to floating rates, so when SORA moves, their interest expenses move with it. Just as water can sink a boat, it can also float one. A REIT with a higher proportion of floating-rate debt feels a SORA change almost immediately, in either direction.
Don’t read too much into spot SORA though. A REIT’s actual borrowing cost is always higher than spot SORA. For floating loans, banks add their own margin and fees on top. For fixed or hedged loans, the rate is based on where the market expects SORA to be over the next few years, not where it sits today.
Even when SORA is around 1%, a well-capitalised S-REIT’s actual funding cost is likely closer to 2.5% to 3%.
2. The Weighted Average Debt Maturity (WADM).
For Singapore REITs (S-REITs), this is typically around 3 to 4 years. A shorter WADM means more debt comes up for refinancing sooner, so rate changes reach it faster. That helps when rates fall, and hurts when they rise.
3. The distribution of when specific debt tranches mature.
This one is more nuanced. A REIT might have a 3-year WADM on paper. But if a large chunk of debt (say, locked in at 4%) matures this year, it gets refinanced at this year’s rates. At 2.5% to 3%, that’s an immediate saving that flows through to the bottom line. If rates have risen above the old 4%, the same tranche becomes a new cost.
All of this moves a REIT’s interest bill. The next question: how does it reach your pocket, and mine?
What This Means For Distribution Per Unit
The maths here is straightforward.
Distribution Per Unit (DPU) is income minus expenses, distributed to unitholders. Interest expense is one of the largest expense items for REITs, and it’s the one most directly affected by interest rate movements.
- Lower borrowing costs mean lower interest expenses.
- Lower interest expenses mean more distributable income.
- More distributable income means better DPU.
An average cost of debt dropping from 4.3% to 3.2% looks small. But that’s a 25% cut in borrowing costs. Since interest is usually the biggest non-property expense for S-REITs, that cut feeds straight into what’s left to pay out. Repeated across a few refinancing rounds, it adds up. The same maths works in reverse when the cost of debt climbs.
These changes take a few quarters to reach DPU, because debt is refinanced in batches. The REITs with debt maturing soonest are affected first, whichever way rates are moving.
A few risks to watch:
- SORA can move faster than expected when global conditions change.
- Credit spreads could widen, making refinancing more expensive than SORA alone suggests.
- REITs with high gearing still face pressure regardless of where rates go.
The maths is clean. Does it actually show up in the numbers? Here’s a real case study.
Case Study: FCT’s Cost Of Debt
Consider Frasers Centrepoint Trust (FCT) as an example. Below are FCT’s average cost of debt from 2022 to 2026.
| Year | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2026 | 3.5% | 3.2% | 3.0% | TBD |
| 2025 | 4.0% | 3.8% | 3.7% | 3.5% |
| 2024 | 4.3% | 4.1% | 4.1% | 4.1% |
| 2023 | 3.6% | 3.7% | 3.8% | 4.3% |
| 2022 | 2.2% | 2.4% | 3.0% | 3.5% |
Notice how the average cost of debt peaked around Q4 2023 and Q1 2024, and has been coming down since.
Here’s where it gets interesting for fixed-rate debt too.
You might think fixed-rate debt is unaffected by changes in SORA. But when the time comes to refinance, these REITs can lock in new, lower rates. It’s like locking in your Netflix subscription rate before they bump up the prices again.
March 2025. FCT issued SGD$80 million in fixed-rate green notes due 2032 at 3.3%. That’s 0.7% lower than their average cost of debt at the time.
January 2026. Frasers Centrepoint Trust secured a S$400 million green loan facility. These loans are mostly floating rate, typically SORA plus a spread. REITs often hedge some of this exposure with interest rate swaps, standard practice among S-REIT managers.
When SORA is low, REITs can refinance below their existing average cost of debt, which is what FCT did with its green notes.
Cheaper financing doesn’t just help with existing debt. It also makes it easier for REITs such as FCT to fund acquisitions and AEIs at more attractive borrowing costs, which can be accretive to DPU if done well.
FCT is one example of the mechanic in action. Rates also affect REITs in a second way: how their yield compares to a risk-free option.
Yield Spread: S-REITs vs SSB
That comparison is the yield spread, which is the extra income you earn from REITs compared to a risk-free alternative. It’s a quick way to gauge whether REITs are paying you enough to take on the added risk.
Yield Spread = Average REIT Dividend Yield – Risk-Free Government Bond Yield
When risk-free rates (like SSB yields) drop but REIT dividend yields stay relatively stable, the yield spread widens. A wider spread makes REITs more attractive as an income play compared to parking money in bonds or savings instruments. When risk-free rates rise, the spread narrows.
As of October 2026, the picture looks like this:
- Syfe REIT+ Estimated Dividend Yield (100% REITs) = 5.81% (Syfe, August 2026)
- Singapore Savings Bonds 10-Year Average Yield = 2.45% (November 2026 issue)
- Yield Spread = 3.36% (5.81% − 2.45%)
The spread has narrowed from 3.79% in June 2026. SSB rates rose for three issues in a row, while the REIT+ yield estimate dipped from 5.93% to 5.81%.
iFAST measures the spread against the 10-year Singapore government bond instead. It puts the spread at 3.63% in August 2026, slightly below its 10-year average of 3.70%.
I check the spread alongside unit prices, because price alone doesn’t show how much extra income I get for the risk. For what it’s worth, I invest in S-REITs through Syfe REIT+ myself, so this is the spread I’m watching with my own money on the line.
Which numbers do I check when I look at a specific REIT?
The Metrics I Watch In Any REIT
These are the usual metrics I look at when sizing up a REIT’s debt picture, whichever way rates are moving. They tell me how exposed a REIT is to rate moves and how fast any change will show up.
Average cost of debt.
Which way is it trending? This is the most direct indicator of how SORA is flowing through to the books. FCT’s steady drop from its 4.3% peak is the kind of trend I want to see.
WADM and fixed/floating ratio.
REITs with a shorter WADM and a higher proportion of floating-rate exposure show rate changes sooner, good or bad.
New debt issuances and refinancing announcements.
New debt priced below a REIT’s existing average cost of debt is a positive signal. New debt priced above it is an early warning.
DPU trajectory.
Over a few quarters, is DPU actually improving as the cost savings work through? The maths is straightforward, so the proof should show up in the numbers.
Changes in SORA don’t hit a REIT all at once. Each quarter, a few debt tranches mature and get refinanced at that quarter’s rates, so the average cost of debt moves gradually. That lag gives you time to watch these metrics before DPU changes.
Tracking debt metrics for every S-REIT is real work. If you’d rather hold a diversified and indexed basket of the top Singapore REITs and skip the per-name homework, that’s exactly why I use Syfe REIT+. Here’s my full review and portfolio returns.
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Kevin started Turtle Investor after hitting rock bottom at negative $25,755 net worth. Today, his monthly alternative income pays for all his daily expenses. He shares what actually works (and what doesn’t) for Singaporeans building wealth. Learn more about Kevin here.
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