Being fervent for properties and stocks, I invested in both for the last decade and more. In my opinion, both asset classes are necessary investments.
Which one is better investment?
WHY I THINK PUTTING MORE MONEY IN PROPERTY IS BETTER
Without a shadow of doubt, property lar….!
This is because of the power of leverage with a very safe and stable backed collateral like property in Singapore.
Let me also explain with an arbitrary logical example with a typical 50% capital appreciation of property prices.
- Year 2010. BUY House = 1 million.
- Down payment = 200K. Buyer stamp duty in 2010 = 30K.
- Total initial Outlay S$230K
- Interest 1.3% p.a. Total in 10 years ~80K
- Year 2020. SELL House = 1.5 million.
- Agent commission in 2020 = 30K.
- Total expenses = Stamp duty + Comm + interest = 30+30+80 = 140K
- Profit = 500K – 140K = S$360K
- Percentage increase = 360/230 = 157%.
- Annualised = 15.7% p.a.
There is very good. Not just that….
Consider the property is for your own stay, and you spent 60K in 2010 for renovation. In fact can be lesser depending on the condition of the house. Then Net Profit = 360-60 = 300K
BUT BUT BUT … you get free stay in the house for 10 years. Imagine market rental is 3K per month, in ten years, that is 360K.
This will mean that the actual profit is 300+360 = 660K at an annualised return of 29%.
So is the profit good? 29% p.a.! Yes certainly. It is absolutely fantastic!
Furthermore, you get to enjoy the stay in the house and the renovation. For stocks, you can only look at the stocks figures and the stock figures staring back at you. Occasionally you can be over-joyed and at sometimes you can get heart attack.
In the last 20 years, there is only 2 slumps in property prices. That is during the 2003 SARS and 2009 GFC. Still, very quickly the property prices rebounded. On the contrary, stock prices crashed at least 7 times, in 2000 dot.com crisis, 2001 9-11 attacks, 2003, 2009, 2011 European debt crisis, 2016 oil crisis and 2020 Covid crisis.
For me, rarely have I known peers becoming so wealthy from stocks. However, I have seen and heard “tonnes” becoming asset rich from properties and able to retire without financial stress after selling their bigger properties at old age and downgraded to a smaller one.
Those who earn from properties also require comparatively lesser knowledge and effort, and need not to undergo the emotions of seeing their stock portfolio enduring big swings from the cyclical changes of the markets.
THERE ARE ALWAYS FLIP-SIDES AND RISKS
Of course, properties have their flip sides such as non-liquid and needs high initial cash outlay and long-term commitment.
NOT everyone earns big bucks from properties investments. I definitely do not encourage that you go blindly into over-leverage yourself into something that you cannot afford. Everyone has to do your own due diligence.
I have known people who sold their properties at losses after many years. Some lost their jobs, or get into a divorce, and unable to finance their mortgages or get into a force-sale situation with losses. Those who buy Sentosa ten years ago also lost big time now if they still hold on to their properties.
I have also known many who purchase second or third properties for their so-called “investment purposes”, who still need to take loans and incurred the very hefty additional buyer stamp duties. Frankly, after delving into it my friends and do the calculations, their second “so-called investment property” is not generating profits after subtracting the interest, idling times and other expenses. They also have difficulties finding tenants with good rental while still having to pay the mortgage and interest for the house they stay as well as the property they rented out.
Some are also stuck from being able to upgrade the property they are residing because essentially, they need to sell two properties before they can upgrade to a bigger one, and this normally takes a while.
Of course, if you are super rich and no need to take loan for additional properties, then it is a different story. Then again, why put in all your cash without taking advantage of the low interest rate.
- Both asset classes, properties and stocks are needed in our portfolio
- For own stay property, it is more ok to stretch when you are younger and enjoy your house stay. This is if you are confident that you will still be working, with a sum of emergency funds to pay down the monthly instalments even when you go out of job.
- For second or more properties, be very careful and do the calculations properly. Don’t be enticed by the pride of just owning a second property for the sake of telling others, “oh I have another property”.
- Spend more time reading before investing in stocks. Especially on the non-tangible part of managing your emotions rather than just focusing strictly on the analytics and think that you are “above the world and invincible”, you are not!
The best financial decision I have made this year, is to purchase our property.
Based on the latest property transacted pricing, our house price increase is at least 15% or more. I have also locked in a fixed interest for three years and secured a good rental for it in the interim.
There is absolutely NO WAY EVER within a short time, my stock investment portfolio can compare to the property appreciation, let alone the Chinese stocks’ bloodshed this year.
However, I am very lucky and blessed that I have humbly diversify my portfolio earlier. While my Chinese tech portfolio suffers, my US tech and Singapore’s stocks have buoyed the situation.
So overall, my investment portfolio including all asset classes are doing very well in 2021.
Disclaimer: I am not providing professional advice, but just stating facts based on my own personal experiences.
My Experiences: I have experiences of buying and renting out almost all types of residential housings such as HDB, Condo & Landed properties. I also have been investing for the last decades with experiences owning all sorts of stocks from SG, US, HK, AU and different types of asset classes such as stocks, etfs, bonds, gold, silver, cryptos etc.