Looking at the wealthiest people in Singapore, one can’t help but notice the strong correlation to the real estate businesses. No wonder Singaporeans have such fascination about the property market.
Often when discussing about investments like equity, most would compare the returns with investing in the property asset class. However, based on absolute returns only is not an apple to apple comparison. Property investments have its own set of risk and disadvantages which needs to be taken into consideration as well.
Firstly, there is inefficient pricing mechanism. Equity market has a transparent price traded on the stock exchange, whereas property is priced at valuation which can be very subjective. Location, facing, floor level, amenities, facilities, accessibility, renovation, etc, all play a significant role in affecting the price and beauty lies in the eyes of the beholder.
Secondly, there is limited liquidity. Apart from the less traded small cap stocks, the …