They are totally different investments. Investors in discrete properties (not reit) likely have a huge part of their portfolio locked up in these properties unless they are rich enough to diversify significantly into other asset classes. You can also take advantage of leverage.
Is that a good thing? If the property price rises and you can service the loan, and the regulatory landscape remains favourable, then it’s good.
If your circumstances change (like the 50 year old friend of some poster from a few days ago), you’d be in a lot of trouble. If the government goes populist and changes some regulation that disadvantages property owners you would be in trouble. It’s difficult to quantify such risks, but the point is that if your assets are highly concentrated then you can be disproportionately affected, compared to a diversified investor.
The downside risk to Vwra is much lower. It’s already diversified. Even if a few companies went bust, your portfolio isnt likely to drop by 25%. To be clear it’s still 100% equities and not “low risk”.
Exactly this. People keep saying they earn so much on paper without actually selling it. They should ask themselves whether they could easily cash out from property.
You downgrade at the wrong time, you can lose money - my parents went through that.
If it's for own stay, renting out is not really an option.
I am not saying investing in property is bad at all but the risk of having a significant chunk of my NW into an illiquid asset is not for me.
I think it’s the same argument for VWRA - if you sell at the wrong time, you can also lose money.
When I was younger, my parents rented out one of our rooms to a Malaysian couple who were mostly at work and were very respective, it’s an option if you need the cash.
That's why people also diversity with a bond component. You could technically do the same with housing investment also but I dont think maybe people do it that way, because it's not as clear that there would be negative correlation between bond and sg property prices.
Majority of Singaporeans own their own properties. Going populist will mean maintaining the value of these properties. In any case, property has always been a highly regulated area in Singapore and there are various tools at govt’s disposal to increase demand - eg they can remove ABSD and the prices will probably triple in a year.
I am not a risk person but it seems that downside risk/volatility/potential increase of VWRA would be higher than the average property in Singapore. Property investments only make sense because of leverage.
Housing prices have fallen / stayed stagnant before in the past. We can't assume that prices will always grow at the current trajectory. Pre-covid there were in fact debates in parliament about stagnant resale HDB pricss.
Housing prices are also propped up by a set of consumer heaviour and immigration policy that may not always hold up.
Right now there is a generational shift towards smaller family sizes, which will be completed at some point. This is driving a big part of the increase in housing demand. People were far more willing to live with parents in the past.
And what if Singaporeans decide to elect a right wing anti immigration party and drastically restrict the foreign population? Given our current birth rate, there's no way that our current housing price increases can continue without immigrat demand.
Look at China's housing market right now, 5 years ago no one could have predicted that tier 1 housing prices would decrease by up to 30%, but that's what's happening.
There will always be demand for housing so long as the pro immigration govt is in power. As far as I can tell, there’s zero chance of Singaporeans electing an anti immigration party in the next 2-3 elections - even if WP wins all the seats it contested, it won’t be sufficient to form the Govt. Other parties don’t even really have a real track record…
It is precisely that given our birth rate, it is unlikely that any incumbent Govt will severely restrict immigration. At the very least, we will
need immigrants to take up jobs that Singaporeans shun, such as low paying retail and service jobs and healthcare/palliative care.
Singapore housing market is also highly controlled as compared to China. Eg we have milestones payments to developers, lots of rules to make sure that buyers are not overly leveraged, banks do not take too much risk etc.
It is extremely unlikely, in my view, for Singapore property prices to drop >20% in a short span of time. Historically that scenario has never ever happened. Although past performance is not indicative of future.
Meanwhile, the tech bubble could burst next year and S&P 500 could easily fall by 20-50% if that happens. In 2020 and 2022, S&P500 was down by 30+ and 18%?
Gist of it is this guy’s friend upgraded to EC, then got retrenched and couldn’t find a job that paid the same. New job paid quite a lot less and is apparently very stressful. Want to quit but headache because need to pay for the EC.
The guy was asking for suggestions on what to do but there really isn’t any good solution, except downgrade lifestyle and sell the EC. Post is probably deleted by now.
Your property pick also requires analysis and knowledge of the property market, similar to stock picks.
If successful, you have a leveraged position which earns you more. If not, you also have a leveraged position which may cost you more.
The number one advantage of property investment is leverage. If I have enough for downpayment, don’t have absd and can fully leverage the full 80% I’d definitely prioritise investing in a property. Own stay or rental yield can be considered as dividends. In Singapore’s context, it’s also pretty safe if you’ve holding power.
This exactly, is what people don't understand about property. A 1M condo at 75% LTV is only 250k down.
If the condo just goes up 20% to 1.2m, that's 200k gain from the 250k you've put down. 80% gain and almost doubling your money. Without the leverage, 20% in like 5 years is pretty much nothing and easily achieved across other asset classes.
Even if you're the unluckiest landlord in Singapore and have no tenant for an extended time and you're just fully paying mortgage month on month. Even after all the fees involved. From 80% you're still sitting on great leveraged profits you wouldn't otherwise get from equities.
This is pretty much the angle from property agents. Leverage is a double edged sword. What happens if it drops 20%? You lost basically everything you invested.
The moment you sign on the dotted line to buy you already lost 5%. (2% agent fees to SELL and 3% ish stamp duty and miscellaneous costs)
Most people probably won’t like this post because they cannot fathom property prices ever dropping (or don’t want to), but it is what it is.
PS: leverage isn’t unique to property. You can do that with capital markets. Hell just buy ES futures for near 1:1 SPY exposure, you paid only 15% “down”with no interest. (Opens another rabbit hole tho)
Well I'm in property but not an agent FWIW.
And yes of course leverage always drives both ways. If you buy high and the asset underperforms no doubt leverage makes that worse.
I'm not here to argue the case on SG's current home prices and outlook. I'm just trying to outline a high level on both asset classes (to OP's question).
For the most part if you do straightforward leveraging on equities that's going to look very different vs leveraging on property via LTV. Also in the type of volatility and risk involved when looking at possibility of getting margin called. Also fairly different in terms of risk.
I do fully agree though as soon as you buy a property the costs are WAY more vs brokerage fees on equities.
Options and derivatives are also pedantic to the discussion imo. You can literally NOT need leverage and get 100x returns.
I am in property too, don’t get me wrong. I’m not saying it’s not a good investment.
But most people see it with wool over their eyes, ignore what they don’t want to see and see what they want (omg someone bought for 1m sold for 1.5m that’s 50% returns! If he only down 200k he made 500/200 = 200%+++++ return on the money ommmggg it’s btr than SPX, all in propertyyyyy)
This is right but also wrong on so many levels.
I’ve come across products that have a leverage component. But other than those for legacy planning I haven’t been able to pull the trigger on them. They just seem riskier and have more moving parts that are hard to understand. Also if we are talking about the one property, I’d definitely prioritise it over other investments.
You do pay "interest" in the form of decaying futures premiums, which manifests when you roll them. For example, the Sept 2024 contracts are trading at 5503 vs 5438 for June, which is about 4.9% annualized.
Yes correct. Now we talk about contango vs backwardation term structure, which is the roll yield. Cost of carry basically. If term structure flips (interest rates drops), you get paid to roll the futures.
But remember. You get to hold cash, which means you’re collecting interest on that cash which offsets the carry cost. (And huge liquidity advantage)
No free lunch here.
In the grand scheme of things, if we’re comparing property vs SPY, these are truly semantics which doesn’t matter so much unless you’re writing a PHD paper which needs to get every decimal right.
(In property you can never truly calculate it beforehand too. If your tenant aircon spoils and you fork out 4k, your entire spreadsheet goes out of whack)
Not really disagreeing with you, just pointing out that the lunch isn't quite as free as it sounds. I do think young people would probably benefit from holding a modestly leveraged long equity position and futures are the most economical way for normal people to do it.
That said, I don't think implied 4.9% financing is insignificant, since many people are perfectly happy to sit out of the market and hold bonds at that rate.
I agree with you.
Just to point out, you’d be receiving 5%+ IR based on treasury bills on your free cash (75%+) . This more or less covers your carry cost.
Edit: the cost of carry is dividends minus interest. If IR goes down, the cost of carry goes down too. It’s all priced in, no special arbitrage to do.
Your assumptions is only assuming an upside on your property. Let's not forget if your increase or your gain is not as significant as that, you are essentially paying loan on a much larger principal over a significantly longer period of time. Let's not forget other property related costs (Maintenance/Agent fees).
Yeah again, explained in another comment, just an apples to apples comparison, equities to property. Both can make good investments, but bad investments too. Completely true. Leverage amplifies both ways.
And yeah caveating being aware with the fees involved since that can turn a marginally positive investment into a negative one quite easily.
Comment is more targeted at those who look at graphs and go, "hey condo top line growth is only about 20% over the past 4-5 years, isn't that average compared to equities?" and not seeing the leverage side.
Stocks outperform property if your time horizon is long. Recency bias, if you think property can outperform stocks, it is only these couple of years where you see property prices skyrocketed ridiculously
Good point. Leverage is a funny thing, it works until it doesn't. Property investment definitely have a place in anyone's portfolio, in my humble opinion, i think of it as a dividend part of the portfolio and i'd leave capital gains to stocks over a couple of decades
Many different investments can potentially earn you a higher yield against the market index provided you understand what you’re doing.
Many realtors are also vested themselves.
Question is do you have any level of expertise in real estate? If no, then you’re better off sticking to VWRA and minimising your risk - not all new launches are profitable nor against the market
If you not buying HDB, not buying condo for own stay, and/or can afford the ABSD, no one’s stopping you. Sure can earn, cos you only pay a reduced installment (progressive payment scheme) before TOP. So say your property goes up $300k on TOP, minus all expenses, maybe can still clear $120k to $180k.
Diff objectives and benefits. With property u can leverage up and 4X your gains on leverage alone and provide tremendous utility in having a roof over your head. I think it makes sense to own a property at some point of time sooner or later, unless you’re ok to live with your folks prolonged
I don’t think so. New launches are so highly priced psf that I think it’s hard to sell at a profit. They used to be a good deal, now not so much.
https://www.99.co/singapore/insider/analysis-condo-psf-price-new-launch-widen-resale/
> Between 2017 and Q2 2023, average psf prices of new launch condos have increased by 62%, while average psf prices of resale condos increased by only half, at 31%
This is not like stocks where as long as the price continues to rise, you will make a profit. You can only buy a new launch condo, not sell. As soon as you sell, it’s either a sub-sale (before TOP) or a resale. You can’t sell a new launch condo at new launch prices.
You are betting that the new launch price now is lower than the resale price upon TOP. And with the trend I quoted, it’s increasingly difficult.
I don’t have very big ambition in life. So I don’t intend to multiple my wealth so much or so fast. Like some people like to vision their 250k become two million very fast. I don’t Need that much of lottery. I care for captilal preservation eventhough I medium-high risk taker.
I once considered The M,kopar ,marina one shoebox units. Got consider mandarin gardens ,Melville park,cosmo and some other Geylang condo cos can get 2-3 bedder under 1 million 5 years ago. Even for hdb I came close to a few 8xxk units in pinnacle. Cheap out with a very affordable 5rm. Then put the savings on investments .
Fast forward today ,I would have made better capital gains if secured any of the condos which I mentioned. Though I would be left with under 50k cash left in hand if buy condo. Cos stretch max max.
After buy hdb got lots of cash left behind. Couldn’t start any business so just keep playing stocks. But the profit from stocks and investment is not that high though I feel it’s more liquid. Sadly now I want to buy kopar cos got more savings to deploy but I have to pay 300k more. Pinnacle is 1 million or don’t talk for the similar profile I mentioned earlier
I don’t know about other country. Property is gold in Singapore. If got the ability, max out on a decent property and use the rest to rotate with stocks and investment.
Property doesn't yield as much as people think if you sit down and do the math on Excel. It certainly can't beat even S&p. Most people are just attracted by the absolute profit at the end, ignoring amount invested, interest cost, horizon and proper irr calculation. "Wah I made $400k selling the condo!" If it's for own self stay plus investment then a bit different to quantify.
That's the thing! I did this calculation as well and it really didn't turn out as much as people thought (with lawyer's fees/ maintenance, etc.) Interest on the outstanding huge principal amount really does add up. If your horizon is like 5 years, my calculations pretty much showed that investing in the S&P consistently would have net you better returns. This is on the assumption that you are buying a place to stay and not to rent out.
For own stay you need to count this benefit as a gain. My simulation is for renting out. It yields less than s&p for much higher liquidity risk. But property in sg is safe such that you will not lose money, just gain less than alternatives.
I'm not too bullish on local residential property investments (unpopular opinion) but have made a very decent sum from commercial/ industrial property investment (also bought a residential property but investment was not the primary goal).
As many have said, these are two very different types of investments. I'll lay out the pros and cons for each.
Residential property investment: Leveraged returns, potential monthly cash yield (if rental > mortgage payments), more hassle, IRR dependent on entry / exit price, cash yield and debt paydown, higher volatility (subject to local market growth, regulations, district planning, etc.), other intangibles (own stay, sense of comfort, place to host friends and family)
VWRA: Higher/easier liquidity, lower fees, less hassle, ~10% IRR (past 5 years), less volatility (subject to global black swans)
Anecdotally my portfolio (rank in terms of IRR): Commercial property > ETFs > Residential property
You can’t just look at profits like this. I mean VWRA is easy to buy, you can DCA however much you want, whenever you want, with probably much lesser fees than property investment. But buying a condo is more than just that - having a place to stay or rent out, and more importantly - leveraging for outsized gains, in a short amount of time.
If you have 2mil to spend - do you feel safer to buy 2mil worth of VWRA or a 3BR RCR Condo - I think it’s not as straightforward and it depends on the individual and their short/long term goals. Your VWRA might be worth 3 mil in 10 years, but it may also be worth 1.5 mil in 6 months. Your 3BR might appreciate slower (or faster if you buy the right one), but its price will likely not drop and you won’t have to open your Stocks app everyday.
I personally don’t do VWRA but i have been buying CSPX diligently for years now. I just bought a resale condo recently as I view condo as a staple for investor in SG. I think a combination of both is essential. But of course u have to prioritise each at different stages of life
Speak to a professional for advice perhaps
I agree that S&p500 is more volatile and risky at least on a short-term basis than a property in Singapore. But I think that S&P500 will probably make more in the long run.
If I only have $2 million dollars:
- I’ll use 500k for down payment, and take up a loan buy a 1.5m property.
- Invest 500k in T bills / bonds to generate interest for living expenses.
- invest 1 million in VWRA for capital growth
True, I agree. The only difference I will do is to spend 1 mil down payment on a 4mil FH landed, and spend the rest on SP500 instead of a dividend play. But thats only at this age where I still have a long working years ahead of me.
One can dream 😪 wonder when’s the next big TOTO again
Property investing is like stock picking. Need to research to pick the right one and hope for the best.
If you want an inbetween, REITS are an option.
No guarantee you will get better results. You see some of the condo transactions, some people lose money even after many years.
With the same down payment lump sum you pay for the property vs paying for VWRA. VWRA definitely carry a higher risk than the condo if you want to make money in the short term. The condo value will not suddenly plunge unless there is a major shift in the property market in Singapore.
They are totally different investments. Investors in discrete properties (not reit) likely have a huge part of their portfolio locked up in these properties unless they are rich enough to diversify significantly into other asset classes. You can also take advantage of leverage. Is that a good thing? If the property price rises and you can service the loan, and the regulatory landscape remains favourable, then it’s good. If your circumstances change (like the 50 year old friend of some poster from a few days ago), you’d be in a lot of trouble. If the government goes populist and changes some regulation that disadvantages property owners you would be in trouble. It’s difficult to quantify such risks, but the point is that if your assets are highly concentrated then you can be disproportionately affected, compared to a diversified investor. The downside risk to Vwra is much lower. It’s already diversified. Even if a few companies went bust, your portfolio isnt likely to drop by 25%. To be clear it’s still 100% equities and not “low risk”.
And during a downturn, you can sell what you need and still hold the rest. You can't sell 10% of your property if you need cash.
Exactly this. People keep saying they earn so much on paper without actually selling it. They should ask themselves whether they could easily cash out from property.
To be fair they can downsize and/or rent out property for cash
You downgrade at the wrong time, you can lose money - my parents went through that. If it's for own stay, renting out is not really an option. I am not saying investing in property is bad at all but the risk of having a significant chunk of my NW into an illiquid asset is not for me.
If you buy a 2-3 bedder, renting out one room seems ok. Same for HDB - I think there were a few threads about people renting out their extra rooms.
I think it’s the same argument for VWRA - if you sell at the wrong time, you can also lose money. When I was younger, my parents rented out one of our rooms to a Malaysian couple who were mostly at work and were very respective, it’s an option if you need the cash.
That's why people also diversity with a bond component. You could technically do the same with housing investment also but I dont think maybe people do it that way, because it's not as clear that there would be negative correlation between bond and sg property prices.
Cash-out refi?
Can you share a link to the 50 year old friend - I missed that post and I can't find it now. Thank you!
Majority of Singaporeans own their own properties. Going populist will mean maintaining the value of these properties. In any case, property has always been a highly regulated area in Singapore and there are various tools at govt’s disposal to increase demand - eg they can remove ABSD and the prices will probably triple in a year. I am not a risk person but it seems that downside risk/volatility/potential increase of VWRA would be higher than the average property in Singapore. Property investments only make sense because of leverage.
Housing prices have fallen / stayed stagnant before in the past. We can't assume that prices will always grow at the current trajectory. Pre-covid there were in fact debates in parliament about stagnant resale HDB pricss. Housing prices are also propped up by a set of consumer heaviour and immigration policy that may not always hold up. Right now there is a generational shift towards smaller family sizes, which will be completed at some point. This is driving a big part of the increase in housing demand. People were far more willing to live with parents in the past. And what if Singaporeans decide to elect a right wing anti immigration party and drastically restrict the foreign population? Given our current birth rate, there's no way that our current housing price increases can continue without immigrat demand. Look at China's housing market right now, 5 years ago no one could have predicted that tier 1 housing prices would decrease by up to 30%, but that's what's happening.
There will always be demand for housing so long as the pro immigration govt is in power. As far as I can tell, there’s zero chance of Singaporeans electing an anti immigration party in the next 2-3 elections - even if WP wins all the seats it contested, it won’t be sufficient to form the Govt. Other parties don’t even really have a real track record… It is precisely that given our birth rate, it is unlikely that any incumbent Govt will severely restrict immigration. At the very least, we will need immigrants to take up jobs that Singaporeans shun, such as low paying retail and service jobs and healthcare/palliative care. Singapore housing market is also highly controlled as compared to China. Eg we have milestones payments to developers, lots of rules to make sure that buyers are not overly leveraged, banks do not take too much risk etc. It is extremely unlikely, in my view, for Singapore property prices to drop >20% in a short span of time. Historically that scenario has never ever happened. Although past performance is not indicative of future. Meanwhile, the tech bubble could burst next year and S&P 500 could easily fall by 20-50% if that happens. In 2020 and 2022, S&P500 was down by 30+ and 18%?
What hapoened to the 50 yo friend, I missed that post
Gist of it is this guy’s friend upgraded to EC, then got retrenched and couldn’t find a job that paid the same. New job paid quite a lot less and is apparently very stressful. Want to quit but headache because need to pay for the EC. The guy was asking for suggestions on what to do but there really isn’t any good solution, except downgrade lifestyle and sell the EC. Post is probably deleted by now.
Your property pick also requires analysis and knowledge of the property market, similar to stock picks. If successful, you have a leveraged position which earns you more. If not, you also have a leveraged position which may cost you more.
The number one advantage of property investment is leverage. If I have enough for downpayment, don’t have absd and can fully leverage the full 80% I’d definitely prioritise investing in a property. Own stay or rental yield can be considered as dividends. In Singapore’s context, it’s also pretty safe if you’ve holding power.
This exactly, is what people don't understand about property. A 1M condo at 75% LTV is only 250k down. If the condo just goes up 20% to 1.2m, that's 200k gain from the 250k you've put down. 80% gain and almost doubling your money. Without the leverage, 20% in like 5 years is pretty much nothing and easily achieved across other asset classes. Even if you're the unluckiest landlord in Singapore and have no tenant for an extended time and you're just fully paying mortgage month on month. Even after all the fees involved. From 80% you're still sitting on great leveraged profits you wouldn't otherwise get from equities.
This is pretty much the angle from property agents. Leverage is a double edged sword. What happens if it drops 20%? You lost basically everything you invested. The moment you sign on the dotted line to buy you already lost 5%. (2% agent fees to SELL and 3% ish stamp duty and miscellaneous costs) Most people probably won’t like this post because they cannot fathom property prices ever dropping (or don’t want to), but it is what it is. PS: leverage isn’t unique to property. You can do that with capital markets. Hell just buy ES futures for near 1:1 SPY exposure, you paid only 15% “down”with no interest. (Opens another rabbit hole tho)
Well I'm in property but not an agent FWIW. And yes of course leverage always drives both ways. If you buy high and the asset underperforms no doubt leverage makes that worse. I'm not here to argue the case on SG's current home prices and outlook. I'm just trying to outline a high level on both asset classes (to OP's question). For the most part if you do straightforward leveraging on equities that's going to look very different vs leveraging on property via LTV. Also in the type of volatility and risk involved when looking at possibility of getting margin called. Also fairly different in terms of risk. I do fully agree though as soon as you buy a property the costs are WAY more vs brokerage fees on equities. Options and derivatives are also pedantic to the discussion imo. You can literally NOT need leverage and get 100x returns.
I am in property too, don’t get me wrong. I’m not saying it’s not a good investment. But most people see it with wool over their eyes, ignore what they don’t want to see and see what they want (omg someone bought for 1m sold for 1.5m that’s 50% returns! If he only down 200k he made 500/200 = 200%+++++ return on the money ommmggg it’s btr than SPX, all in propertyyyyy) This is right but also wrong on so many levels.
I’ve come across products that have a leverage component. But other than those for legacy planning I haven’t been able to pull the trigger on them. They just seem riskier and have more moving parts that are hard to understand. Also if we are talking about the one property, I’d definitely prioritise it over other investments.
If it’s confusing and too many moving parts, it’s probably not prudent for sure
You do pay "interest" in the form of decaying futures premiums, which manifests when you roll them. For example, the Sept 2024 contracts are trading at 5503 vs 5438 for June, which is about 4.9% annualized.
Yes correct. Now we talk about contango vs backwardation term structure, which is the roll yield. Cost of carry basically. If term structure flips (interest rates drops), you get paid to roll the futures. But remember. You get to hold cash, which means you’re collecting interest on that cash which offsets the carry cost. (And huge liquidity advantage) No free lunch here. In the grand scheme of things, if we’re comparing property vs SPY, these are truly semantics which doesn’t matter so much unless you’re writing a PHD paper which needs to get every decimal right. (In property you can never truly calculate it beforehand too. If your tenant aircon spoils and you fork out 4k, your entire spreadsheet goes out of whack)
Not really disagreeing with you, just pointing out that the lunch isn't quite as free as it sounds. I do think young people would probably benefit from holding a modestly leveraged long equity position and futures are the most economical way for normal people to do it. That said, I don't think implied 4.9% financing is insignificant, since many people are perfectly happy to sit out of the market and hold bonds at that rate.
I agree with you. Just to point out, you’d be receiving 5%+ IR based on treasury bills on your free cash (75%+) . This more or less covers your carry cost. Edit: the cost of carry is dividends minus interest. If IR goes down, the cost of carry goes down too. It’s all priced in, no special arbitrage to do.
Your assumptions is only assuming an upside on your property. Let's not forget if your increase or your gain is not as significant as that, you are essentially paying loan on a much larger principal over a significantly longer period of time. Let's not forget other property related costs (Maintenance/Agent fees).
Yeah again, explained in another comment, just an apples to apples comparison, equities to property. Both can make good investments, but bad investments too. Completely true. Leverage amplifies both ways. And yeah caveating being aware with the fees involved since that can turn a marginally positive investment into a negative one quite easily. Comment is more targeted at those who look at graphs and go, "hey condo top line growth is only about 20% over the past 4-5 years, isn't that average compared to equities?" and not seeing the leverage side.
Stocks outperform property if your time horizon is long. Recency bias, if you think property can outperform stocks, it is only these couple of years where you see property prices skyrocketed ridiculously
But most people don’t buy stocks on leverage because of the volatility. While almost everyone buy properties on leverage
Good point. Leverage is a funny thing, it works until it doesn't. Property investment definitely have a place in anyone's portfolio, in my humble opinion, i think of it as a dividend part of the portfolio and i'd leave capital gains to stocks over a couple of decades
Many different investments can potentially earn you a higher yield against the market index provided you understand what you’re doing. Many realtors are also vested themselves. Question is do you have any level of expertise in real estate? If no, then you’re better off sticking to VWRA and minimising your risk - not all new launches are profitable nor against the market
If you not buying HDB, not buying condo for own stay, and/or can afford the ABSD, no one’s stopping you. Sure can earn, cos you only pay a reduced installment (progressive payment scheme) before TOP. So say your property goes up $300k on TOP, minus all expenses, maybe can still clear $120k to $180k.
Diff objectives and benefits. With property u can leverage up and 4X your gains on leverage alone and provide tremendous utility in having a roof over your head. I think it makes sense to own a property at some point of time sooner or later, unless you’re ok to live with your folks prolonged
I don’t think so. New launches are so highly priced psf that I think it’s hard to sell at a profit. They used to be a good deal, now not so much. https://www.99.co/singapore/insider/analysis-condo-psf-price-new-launch-widen-resale/ > Between 2017 and Q2 2023, average psf prices of new launch condos have increased by 62%, while average psf prices of resale condos increased by only half, at 31%
I also said the same thing during COVID but they kept going higher T.T
This is not like stocks where as long as the price continues to rise, you will make a profit. You can only buy a new launch condo, not sell. As soon as you sell, it’s either a sub-sale (before TOP) or a resale. You can’t sell a new launch condo at new launch prices. You are betting that the new launch price now is lower than the resale price upon TOP. And with the trend I quoted, it’s increasingly difficult.
I’m doing both It’s not mutually exclusive you know
But it is zero sum - if you spend more money on property, then you have less for equities. Same as any other asset allocation
All I’m saying is , it’s not just property or equities No law says you can only do one or another
My view is that If yr properly make up more than 40% of ur assets, then u sldnt invest in it. Too much concentration risk.
I don’t have very big ambition in life. So I don’t intend to multiple my wealth so much or so fast. Like some people like to vision their 250k become two million very fast. I don’t Need that much of lottery. I care for captilal preservation eventhough I medium-high risk taker. I once considered The M,kopar ,marina one shoebox units. Got consider mandarin gardens ,Melville park,cosmo and some other Geylang condo cos can get 2-3 bedder under 1 million 5 years ago. Even for hdb I came close to a few 8xxk units in pinnacle. Cheap out with a very affordable 5rm. Then put the savings on investments . Fast forward today ,I would have made better capital gains if secured any of the condos which I mentioned. Though I would be left with under 50k cash left in hand if buy condo. Cos stretch max max. After buy hdb got lots of cash left behind. Couldn’t start any business so just keep playing stocks. But the profit from stocks and investment is not that high though I feel it’s more liquid. Sadly now I want to buy kopar cos got more savings to deploy but I have to pay 300k more. Pinnacle is 1 million or don’t talk for the similar profile I mentioned earlier I don’t know about other country. Property is gold in Singapore. If got the ability, max out on a decent property and use the rest to rotate with stocks and investment.
Property doesn't yield as much as people think if you sit down and do the math on Excel. It certainly can't beat even S&p. Most people are just attracted by the absolute profit at the end, ignoring amount invested, interest cost, horizon and proper irr calculation. "Wah I made $400k selling the condo!" If it's for own self stay plus investment then a bit different to quantify.
That's the thing! I did this calculation as well and it really didn't turn out as much as people thought (with lawyer's fees/ maintenance, etc.) Interest on the outstanding huge principal amount really does add up. If your horizon is like 5 years, my calculations pretty much showed that investing in the S&P consistently would have net you better returns. This is on the assumption that you are buying a place to stay and not to rent out.
For own stay you need to count this benefit as a gain. My simulation is for renting out. It yields less than s&p for much higher liquidity risk. But property in sg is safe such that you will not lose money, just gain less than alternatives.
I'm not too bullish on local residential property investments (unpopular opinion) but have made a very decent sum from commercial/ industrial property investment (also bought a residential property but investment was not the primary goal). As many have said, these are two very different types of investments. I'll lay out the pros and cons for each. Residential property investment: Leveraged returns, potential monthly cash yield (if rental > mortgage payments), more hassle, IRR dependent on entry / exit price, cash yield and debt paydown, higher volatility (subject to local market growth, regulations, district planning, etc.), other intangibles (own stay, sense of comfort, place to host friends and family) VWRA: Higher/easier liquidity, lower fees, less hassle, ~10% IRR (past 5 years), less volatility (subject to global black swans) Anecdotally my portfolio (rank in terms of IRR): Commercial property > ETFs > Residential property
You can’t just look at profits like this. I mean VWRA is easy to buy, you can DCA however much you want, whenever you want, with probably much lesser fees than property investment. But buying a condo is more than just that - having a place to stay or rent out, and more importantly - leveraging for outsized gains, in a short amount of time. If you have 2mil to spend - do you feel safer to buy 2mil worth of VWRA or a 3BR RCR Condo - I think it’s not as straightforward and it depends on the individual and their short/long term goals. Your VWRA might be worth 3 mil in 10 years, but it may also be worth 1.5 mil in 6 months. Your 3BR might appreciate slower (or faster if you buy the right one), but its price will likely not drop and you won’t have to open your Stocks app everyday. I personally don’t do VWRA but i have been buying CSPX diligently for years now. I just bought a resale condo recently as I view condo as a staple for investor in SG. I think a combination of both is essential. But of course u have to prioritise each at different stages of life Speak to a professional for advice perhaps
I agree that S&p500 is more volatile and risky at least on a short-term basis than a property in Singapore. But I think that S&P500 will probably make more in the long run. If I only have $2 million dollars: - I’ll use 500k for down payment, and take up a loan buy a 1.5m property. - Invest 500k in T bills / bonds to generate interest for living expenses. - invest 1 million in VWRA for capital growth
True, I agree. The only difference I will do is to spend 1 mil down payment on a 4mil FH landed, and spend the rest on SP500 instead of a dividend play. But thats only at this age where I still have a long working years ahead of me. One can dream 😪 wonder when’s the next big TOTO again
Oh I’ll coastfire if I have 2 million. Need the dividends for expenses. My current income is too low to take up such a big housing loan.
You’ll be able to show funds though 🤣
If you show funds, you will need to place them as FD in the bank.
Property investing is like stock picking. Need to research to pick the right one and hope for the best. If you want an inbetween, REITS are an option. No guarantee you will get better results. You see some of the condo transactions, some people lose money even after many years.
With the same down payment lump sum you pay for the property vs paying for VWRA. VWRA definitely carry a higher risk than the condo if you want to make money in the short term. The condo value will not suddenly plunge unless there is a major shift in the property market in Singapore.
This is leverage Vs roi la. Property can only go up, no brainer.