Do Properties Or Shares Make Better Investments?

Do Properties or Shares Make Better Investments? Singaporeans have a penchant for properties. It is not difficult to comprehend this, because, land is scarce in Singapore and we often hear stories about people making a lot of money from properties. However, are properties really better investments than shares? Week ago A, Today published articles by OrangeTee titled ECs: Gaining Value Over the future, which shows the gains by Executive Condominiums (ECs) by the end of the Minimum Occupation Period (MOP) and upon privatization. The email address details are reproduced below for easy reference point. The results show that at the end of the MOP, which is approximately 7 years from the launch of the EC, not absolutely all ECs earn money.

The average gain from the 21 ECs listed in the analysis is 5.9%, while the median gain is -13.0%. Today pointed out, As, at the final end of MOP, ECs aren’t “sure-win” investments. The results for each batch of ECs and the corresponding profits from STI by the end of the MOP are shown below. In the number above, 12 months of start and MOP conclusion are grouped jointly all ECs having the same. Using the first batch “1996 – 2004” for example, the first figure (i.e. 1994) shows the entire year of launch as the second figure (i.e. 2004) shows the entire year of MOP conclusion.

Together, they show the holding period from release till end of MOP. Through the figure above, not all ECs generate income at the final end of MOP. Those launched before 1999 lost money while those launched after 1999 made money. Fig. 3 above shows the performance of ECs and stocks at the ultimate end of privatization, which is 12 years from the release of the EC around. The performance of ECs upon privatization improved in comparison to that by the end of MOP significantly.

Compared to shares, there are 3 batches of ECs that outperformed the STI, specifically, the 1999-2010, 2001-2013, and 2001-2014 batches. However, overall for the 21 ECs studied, ECs underperformed the STI still. The common return by ECs is 64.2%, while the average return by STI is 101.5% within the 12-year holding period. The above-mentioned comparison involves only ECs rather than other condominiums. However, by Today according to the study reported, new ECs have the average discount of about 20% compared to new real estate. This discount reduces to 9% by the end of MOP and 5% upon privatization.

Thus, if ECs, with their price benefit over mass market real estate, underperform shares already, it could be inferred that mass market condomiuniums will underperform shares also. It ought to be mentioned that the above-mentioned comparison will not include rental produces by dividend and ECs produce of STI. The common rental yield is around 3-4%, while the average dividend yield is 3%. Thus, the exclusion of local rental produce and dividend produce does not significantly affect the results of the assessment. Having said the above mentioned, although properties underperform shares generally, there are vintages for both properties and shares. Properties bought using years have a tendency to perform better than properties bought in other years.

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Shares have the same characteristics. Thus, there will be periods when properties will outperform shares. It is therefore important to be selective and buy shares and properties when they are undervalued. In conclusion, the comparison implies that, contrary to popular perceptions, properties are, in general, not better investments than shares. The primary reason for the favorite notion is because properties are usually bought with bank loans likely, magnifying increases in size on the downpayment thus. With an unleveraged basis, properties aren’t better investments than shares.

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