Time for a short trip down memory lane.
Below are the total returns for a handful of listed property developers on the SGX for two slightly different periods of time. Q2 2009 is when the SG private property price index bottomed. 31 Dec 2010 is the date I joined this forum.
Everyone is going to have their own takeaways from looking at this. Here are some of mine:
1. This is minor support for the argument that active investing is alive and well. Ho Bee, Lian Beng, Low Keng Huat have all done quite well relative to peers and thier investment merits have been some of the more widely discussed ones in this forum. Concerns over Oxley have also turned out to be warranted.
2. This table masks the volatility in returns. Look up the trailing 10-year returns of this group and one will see that many of these have not done well in the last decade. As a group, their average total returns have been just 12% (~1% CAGR) compared to 48% for the STI.
3. Apart from hot money from overseas investors and speculators, some of the main drivers of residential property prices have been (i) population growth (ii) wage growth (iii) ease of credit. This will likely remain so going forward.
4. Investing in physical property could have been a totally viable alternative. The private property index has roughly doubled since the Q2 2009 bottom. Assuming an LTV ratio of 80% and a 20-year mortgage with 4% interest rates, if you had bought at Q2 2009 and sold today, you would have gotten a 6% IRR. If you had leased it out and covered half your monthly mortgage payments, IRR would have been 10.6%. Before transaction fees of course.
5. Even better, if you had listened to Warren and bought America (S&P 500) at Q2 2009, your CAGR would have been 13,7% up until now. I know he said it in Oct 2008, but the S&P 500 was around the same level then so the point stands.
Despite all the ups and downs, the period since the GFC has been kind to the active SG property investor. Not generous, but kind. May those of you who are one reflect, live long and prosper.
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