err, i think you guys are still comparing apples to orange, the leverage for them works differently. as pointed by fluxos "Properties, equity and bonds are different asset classes and fit for different purposes. The key benefit of property is leverage, and its the cheapest and safest form of leverage you can obtain as a retail investor. Period."
in that sentence, there is an irony. Since they are different, you cannot then define it's the safest. its situational
i'm a layman, so let me illustrate in simple terms:
- I have 200k, say i decide to invest only one option, either in stocks or in property.
- if i invest in 1mil property, i have to borrow 800k on 2% interest rate (don't quote why i don't use those near 1%, those bluff one lar, after few yrs shoot up)
- if i compare to stocks, how you want to compare? taking loan of 800k to match the 1mil property situation? play CFD with 5x leverage? (if so don't need to loan so why compare interest rates?)
Conclusion: which scenarios you guys are comparing, think in real terms, real situation.
2. for property, i briefly mentioned about amortisation and other costs. This means if you just cannot compare the final selling price of stock vs property (you have to minus off all the costs involved)
- for above example of taking 800k loan, 2% interest. Say renovation plus initial charges/fees add up to 50k (usually lot more since ppl want good rental).
- do you know that by year 3, you have lost 46k interest? few sub scenarios then:
- If your house appreciates 3% yearly, you barely break even
- If your house don't appreciate, but full rental, you barely break even
- If both the above happens, good, you earned in the range of 50-100k
<<for the above scenario, if you draw the timeline longer, of coz it's better, i.e. if you invest in property for longer term, you pay more principal so breakeven closer>>
3. If i invest the 200k plus loan 800k for stocks (or 200k CFD 5x, for the leverage effect with CFD costs. Similarly there are different risks, property is due to appreciation/depreciation and rental, stock is simply... rise or fall lor. so how to compare... say i die die want to compare... i buy something with expected dividend yield of 6%, my loan interest is 3% (anyhow hamtum), you actually earned 150k (final profit minus interest)
<<then of coz my scenario is purposefully biased to stocks, which is why if you change the factors for both property and stocks, you will realise everything changes>>
as such, the comparison on interest rates is ... not relevant...
disclosure: i owned bit of stocks and and am a small landlord, which is why i believe... diversify lah