Too Much Money is Looking for a Home... Corrective Phase Has Begun

On Saturday, I was looking at several projects launched by Far East Organisation in the central region. They are often 99-year leasehold and break the all-time record around the area. The snazzy show-flat really tempted me. But I held my cheque book firmly because I know that by the time these homes TOP, the real estate scenario may have changed. I remember the nightmares of 1997 and 2000, where people lined up overnight for new condominium launches, buying units at record highs. These people had to hold on to their flats until 2011. That's 14 to 11 years to break even, excluding rental.

Then I visited Oxley Tower on Sunday. The show room was full! It was unlike luxury condo's showrooms, which are dead quiet. They were pitching freehold offices at S$3,200 - 3,400 psf, retail units for S$6,000 psf. The agent was very confident that by the time the offices are completed, they will fetch $15 - 20 psf per mth. At $15 psf pm, and at $3,200 psf of purchase price, it will fetch 5.63% of yield. However, as the agent rattled on, I checked Property Guru for surrounding asking rent. At Springleaf Tower, the asking rent was $7 to 10 psf pm. I asked the agent to give me a feasibility study on the surrounding rentals. He said none was available. "Just believe me!" I can't fathom that in Singapore, a supposedly first world country, sales of property is done in such a third world way. It's all just heresay, leap of faith. It was impossible to verify information. Singaporeans will believe anything. If you tell them 5 years later, Santa Clause will appear from the north, they will believe you. I believe such reports are available, but the agents and sellers are not releasing them because information is power. Disinformation will confuse the public and make the market inefficient. I just think this is plain immoral.

Anyway, as I looked at the stock markets, the correction that is supposed to occur in March seems like "almost over". There's just too much cash on the sidelines looking for a home. The low interest rate environment is forcing money to flow out of deposits into real estate and stocks. It's frightening.

But as I look at the charts closely, even if we escape this a big correction this week, another bigger one is lurking round the corner because stocks are heavily overbought on the weekly chart.
Perhaps by May 2012, the rally will finally end. Perhaps it may last all the way till Oct 2012. credit spreads have risen. Credit spreads don't lie. They have been falling 30 Sep 2011, making lower highs, lower lows. The good times are back... I doubt if this rally can last beyond Dec 2012... I watching it like a hawk and riding the trend up, taking profits along the way...