15-07-2012, 08:29 AM
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The Straits Times
www.straitstimes.com
Published on Jul 15, 2012
small change
Property v stocks: No clear-cut winner
Many investors favour property but it's best to exercise caution as nothing is risk-free
By Lee Su Shyan
Earlier this month, the Singapore Exchange offered an analysis showing that investing in a basket of stocks - the Straits Times Index (STI) - was a clear winner over property, based on a 10-year period from 2002.
Property, based on the Urban Redevelopment Authority (URA) price index, would have given you an annualised return of 6.04 per cent, while investing in the STI would have trumped that at 6.37 per cent. If dividends were included, the STI return would have risen to 9.23 per cent.
However, stocks do not always come up tops. The results depend on the timeframe in question.
If you looked at a one-year timeframe, residential property would have outperformed the STI. But in the last six months, the order has reversed with the STI powering ahead of the URA index.
Still, this analysis is not deterring those making a beeline for property showrooms. That is because investors and home owners can identify more easily with property's returns.
For example, my private apartment near Moulmein has doubled in value in the past 10 years or so. Hypothetically, I could have bought a blue chip back then and achieved a larger percentage return.
OCBC Bank's share price has roughly more than tripled in the past 10 years. Keppel Corp's rise has been about five times.
But to achieve the same absolute sum gain in stocks as I have achieved in property, I would have had to cough up a few hundred thousand dollars in cash to buy those counters, which is hardly feasible.
The above analysis points to the power of leverage. As long as one is able to afford the down payment - with parents' help or from the sale proceeds of one's HDB flat - a private condominium is within the reach of people. Given the prevailing low interest rates, the monthly repayments are manageable.
While the dividends earned add to returns from share price appreciation, the URA property price index does not take into account rental returns.
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The Straits Times
www.straitstimes.com
Published on Jul 15, 2012
small change
Property v stocks: No clear-cut winner
Many investors favour property but it's best to exercise caution as nothing is risk-free
By Lee Su Shyan
Earlier this month, the Singapore Exchange offered an analysis showing that investing in a basket of stocks - the Straits Times Index (STI) - was a clear winner over property, based on a 10-year period from 2002.
Property, based on the Urban Redevelopment Authority (URA) price index, would have given you an annualised return of 6.04 per cent, while investing in the STI would have trumped that at 6.37 per cent. If dividends were included, the STI return would have risen to 9.23 per cent.
However, stocks do not always come up tops. The results depend on the timeframe in question.
If you looked at a one-year timeframe, residential property would have outperformed the STI. But in the last six months, the order has reversed with the STI powering ahead of the URA index.
Still, this analysis is not deterring those making a beeline for property showrooms. That is because investors and home owners can identify more easily with property's returns.
For example, my private apartment near Moulmein has doubled in value in the past 10 years or so. Hypothetically, I could have bought a blue chip back then and achieved a larger percentage return.
OCBC Bank's share price has roughly more than tripled in the past 10 years. Keppel Corp's rise has been about five times.
But to achieve the same absolute sum gain in stocks as I have achieved in property, I would have had to cough up a few hundred thousand dollars in cash to buy those counters, which is hardly feasible.
The above analysis points to the power of leverage. As long as one is able to afford the down payment - with parents' help or from the sale proceeds of one's HDB flat - a private condominium is within the reach of people. Given the prevailing low interest rates, the monthly repayments are manageable.
While the dividends earned add to returns from share price appreciation, the URA property price index does not take into account rental returns.
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