Leverage in Stock Market is Better Than Singapore Property?

Just a thought process for now, but I am contemplating.

We have often heard about Singapore property agents who tell us to lever up to enjoy appreciation of Singapore stock property and using rental income to cover the property loan expense. For context, many Singapore properties are only selling at about 3% rental yield (after non owner occupied taxes by IRAS and agent commission). This gives me a "what the fuck" moment. Lets delve more into the maths, how property agents tell us this covers our loan bills.

Property Asset- $2 million, (Loan 50%/Equity 50%)

Rental Income- $7,000 per month for a $2 million condo based on property guru; agent expense of 0.5 months and IRAS taxes of $11,600 annually. This gives a net rental income of $68,900

Loan expense at 3.8% interest- $38,000

Therefore net income is $30,900.

Before the factor of capital gains, the property asset yields about 3% in equity.

How about Stocks?

Well in many SGX stocks, many companies such as United Hampshire REIT/Asian Pay TV and HK related stocks such as LINK REIT and Petrochina etc are yielding 8-10%. 

And with margin loans being low at 4.50-5.58% (see POEM margin financing promotion)

Using the same proportion of 50% equity and 50% loan, assuming one invests in a LINK REIT which yields 8% dividend and has a margin loan of 5.58%, an investor will yield about 8% returns in equity. To understand more about LINK REIT which owns Singapore and China/HK assets, do read here. 

In short, many dividend stocks can leverage on cheap loans in Singapore, with returns better than buying any Singapore property- doing a share financing loan on Asian Pay TV trust will yield a projected 21% annual returns on equity.

This brings me to the question of why should we leverage in singapore properties when so many SGX and even Hong Kong stocks are giving better returns. For context, below are the approximate returns for a few dividend stocks based on a 50% loan/ 50% equity and based on POEMS margin financing rates.

Asian Pay TV Trust (SGX-listed)- Annualised returns on equity (21%)

UtdHampshire REIT (SGX-listed)- Annualised returns on equity (11.5%)

Petrochina (HKEX-listed, which means interest is 5.58%)- Annualised return on equity (10.3%)

LINK REIT (HKEX-listed, which means interest is 5.58%)- Annualised return on equity (8.0%)

<Not doing a sponsored post for POEMS, just an idea that with leverage using Singapore loan on stocks, one could be hitting a gold mine>