It's a theory many had guessed but yet to be proven, properties as an investmentwith its resilienceis indeed the winning performer that leaves all other instrumentsplaying a catch-up game.
It's the "Brick-and-Mortar" story, of things that aren't going away; real assets that is forever in controlled supply; a safe harbor for liquidity and added to that Singapore’s tenacious habit with savings & investments, all succeededthe stellar return of this asset class.
While equities at the time of writing are at the cusp of correction amidst global trades tension. Over a 15 years period, Singapore equities had more than doubled in total returns on a buy-and-hold strategy. This is contrasted to returns by the private residential properties market (incl. rental yield) of 135% and 50% total return of Singapore bonds over the same period.
So,what gives properties its winning edge?It is simple, because savings seldom work like that, precisely a buy-and-hold scenario that assumes a pocket of wealth available and invested at some starting point.
Savings in reality comes from disposable income out of household earnings and they are invested periodically in small amounts to accumulate over time. The flipside therefore of the tremendous equities returns is often times, a lot of gains were made in a relatively short period with lengthy corrections to follow. This has the implication that much of the high digit returns wereachieved only by investmentsleading up to the relevant rising seasons causing the eventual and overall outcome to be muted by volatilities. To this end, we examine a hypothetical savings plan where a household put aside $10,000 per quarter (growing at inflation rate) since 2003 and compare the investment outcome if these were fully invested in Singapore equities, fixed income & properties.
It is apparent properties shines as the leading asset class all due to its ability to produce consistent returns without the distractions. One may ask "who buys properties quarterly this way?", but is it impossible? Will fractional ownershipunlock this trove? Follow our next piece on current barriers to entry and affordability of the housing market.
by Herbert Woo Founder of MicroProperties
wherb@mymicroproperties.com
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