'A lot of groups that are looking to list pan-Asian assets are thinking: 'Where do I want to be?' And at the moment it's more attractive to be a Singapore reit than a Hong Kong reit,' said Alastair Gillespie, co-head of Asian real estate research at UBS.

Singapore has so far amassed 16 reits with a market capitalisation of about US$19.3 billion compared with Hong Kong's seven reits presently valued at US$8.8 billion and Singapore's appeal becomes even more obvious when looking at forthcoming listing plans from mainland reits.

Hong Kong's stock exchange is home to two mainland reits: Rreef China Commercial Trust and GZI Reit. Singapore so far has only one reit with mainland assets - CapitaLand's CapitaRetail China Trust. But the next few deals in the pipeline are expected to go to Singapore.

Rreef, a spin-off from Deutsche Bank's property and infrastructure management arm, was the last reit to list in Hong Kong when it debuted in June and many experts predict it will be the last for some time to come.

'By the end of the year there will be more PRC [mainland] reits in Singapore than in Hong Kong,' forecast Vivian Lam, a Hong Kong partner of Los Angeles-based law firm, Paul Hastings, and a reit specialist.

Ms Lam said she expected 10 to 12 more reits to list in Singapore by the end of the year, of which two to three could be mainland property plays.

There are a number of companies waiting to list reits in Hong Kong, including Far East Consortium International's 10-hotel portfolio which is predicted to raise up to HK$3 billion. However, they remain on the sidelines, especially after witnessing Rreef's muted debut.

'The timing is just not right,' Ms Lam said. 'They're waiting for people to become interested in reits again and in the current atmosphere no one appears very interested.'

Rreef units slumped 10.1 per cent on their first day of trading. Of the seven reits listed in Hong Kong since 2005, only Link Reit and GZI Reit are still trading above their offer prices while Singapore reit prices have generally performed better.

The Hong Kong reit market's poor showing makes it hard to attract new listings; if plain domestic offerings fail to build market momentum with local investors, it's hard to attract foreign money for more exotic offerings.

'Global investors have become quite cautious over Hong Kong reits because of the performance of the incumbents. In contrast, because the Singapore reits have traded strongly above their IPO prices, it's been much easier to raise additional equity to make more acquisitions,' Mr Gillespie said.

One explanation for the poor showing of reits in Hong Kong might be that developer sponsors took a short-term view and packaged reits primarily to divest real estate at the best prices they could get, experts say.

Singaporean sponsors on the other hand have focused on creating acquisitive investment vehicles with defined long-term growth plans. They have also transferred assets into the reits at more attractive prices, creating value for investors.

'If the motivation is to get an asset off the balance sheet at a record price, reit investors pick up on that and get turned off pretty quickly,' said Mr Gillespie.

Bankers and lawyers who help bring reits to market also say that Hong Kong's Securities and Futures Commission (SFC) has been overly cautious in authorising reits in the past, with the result that the market has not been as innovative as Singapore.

'The regulations that Hong Kong has had have proven to be very prescriptive. Overly so,' said JP Morgan real estate head Anthony Ryan. 'The SFC says its job is to protect small investors; the MAS' job in Singapore is to create a viable financial system.'

However, bankers said the SFC has become more accommodating with the last few reits brought to market in Hong Kong, and the SFC itself says this is a new market with room to mature.

'The SFC regulates by use of a principle-based code, which allows for flexibility of approach especially with regard to a new market and product such as reits,' said an SFC spokesman.

There are several differences between the two markets that financiers say are larger, more entrenched issues that regulators or reit sponsors can do little about.

Reits are viewed as income vehicles, similar to interest rate products such as bonds. Hong Kong's interest rate regime closely tracks that of the US because its currency is pegged to the American dollar. This has meant higher interest rates for Hong Kong, and higher benchmark yields in the bond market, which means reits do not appear as attractive as they do in a lower interest rate environment.

Hong Kong's 10-year treasury bond is yielding around 4.82 per cent, for example, versus a yield of just 2.91 per cent on an equivalent issue in Singapore.

Singapore has also created tax breaks to encourage the listing of reits, while in Hong Kong reit assets are taxed the same way as if they were owned by a company.

'The most significant benefit Singapore has is the waiver over tax on income generated by reits, whereas Hong Kong reits are liable for profits tax. Singapore has been more aggressive on general incentives to reit managers in order stay competitive,' said Macquarie Securities Asia reit analyst Matt Nacard.

Hong Kong's bullish retail investors have also played a role in the market shift. For a reit market to flourish, it must first generate local interest in simple offerings and once investors have been convinced they offer a good source of steady income, bankers can put other more exotic, international offerings on the table.

In Hong Kong, reits lost the attention of investors at the first step.

A long-running share rally has raised expectations for capital returns among Hong Kong investors and undermined interest in steadier, profit-generating investments.

One area in which Hong Kong regulators did let sponsors and bankers push the envelope was in spicing up reits to attract the attention of jaded local investors. Hong Kong property prices are relatively high compared with the rents they generate, therefore the assets acquired by reits are unable to provide attractive enough returns from rental income alone.

Sponsors, however, have employed financial engineering that essentially allows borrowings from future earnings to pay immediate returns by assuring investors that rents will rise in the future to cover the difference.

'Trying to provide the sort of yields that investors want is very challenging' Mr Ryan said. 'People looked at various forms of financial engineering as ways to do that at the expense of some of the future growth, and the market has generally shown a disliking for that.'

While the size of the reit market pales in comparison to the billions of dollars in mainland equity that has come to roost in Hong Kong, it's still a business that, if developed, would benefit the SAR as it would create needed liquidity in the commercial property market.

'It is a big loss for Hong Kong. There's a lot of real estate here that I think owners would look to monetise, but it's tricky to make it work in ways that are acceptable to the investor base' Mr Ryan said.