Dear Whizzard, it very much seems like you and I are in the same boat.... and facing the same challenges.

On physical property versus REITS: They are similar in that they provide both capital appreciation and high yield. They are different in that the industrial/office/commercial property cycle is different from the residential property cycle and REITS through have generally higher yield than most property except HDB. I find that the physical property cycle can be just as volatile as property stocks (including REITs although REITS moved in a single direction for a long time). However, there are two differences: Property stocks can have several cycles within a single property cycle because they are affected by external events, while physical property can go into a plateau for a long time and are less senstive to external events. The other factor is that the bank is happy to lend you 80% against physical property but not REITS. Investing in both asset classes provides diversification even though both are property.

I find the Office REIT sector (say CCT, Suntec etc) near bottom in that office rentals (which drive capital values) are at a bottom. By 2013+ rentals should have recovered, capital values as well, leverage for these office REITS will be very low and they will be acquiring. Debt driven acquisitions and higher rentals will significantly boost DPU. Currently office REITS already give you 7% yield.

On the other side, residential property is IMHO in a bubble, while yields are around 3%, which is the same before the big 1997 property crash. Singapore's "global city" changes may sustain these prices, which are approaching or have exceeded the major cities in the world. IMHO the only reason to go in now is the 80% leverage you can get from the bank, but leverage is risk and leveraging to buy assets which are in a bubble can be disaster. Will address some of your other comments later.