An editorial published in The Business Times on Friday – caught my attention. Not just because it was related to property but because it said “Is property becoming king again?”

This editorial is merely highlighting the main points of what is on going in the property, stock market running in opposite directions to the current economic and financial situation of the world, specifically in the US and Europe. As I am writing this article, one of the world’s largest auto manufacturer – General Motors will be filing for bankruptcy in a few hours.

Some call it an ‘end of an Era’, indeed. The last time I heard that phrase, was when Friends screened its last and final episode. And it left an empty weird feeling inside of me, because primetime television shows will no longer consist of weirdly funny, nonsensical American sitcoms.

But I digress…

The BT editorial points out that this current euphoria in the real estate market seems pretentious or seemingly supported by promises of future returns. And buyers are purchasing into returns that are way into the future, hence lengthening the time to reach their breakeven point. It also points out the reality of the economic situation besetting our island city – negative GDP growth projections, increased unemployment and  decreased export statistics.

It is asking us to open our eyes to see the reality of the situation. Yes there has been a stock market rally, but is all this real?

There are valid reasons for the current popularity in the real estate market:

1. Low interest and mortgage rates. This allows buyers to purchase property at ultra low interest rates (interest rates that are lower than your car loan). Similarly, this also means that investment in time deposits or putting money in the bank isn’t going to give you that great return that many are looking at.

2. Upgraders are always looking for opportunities. They are always trying to get out of living in a 3 or 4 room HDB. Many of them have 3 or 4 incomes in such a household. Children coming of age, and wanting to move to a much larger private apartment, and hence snapping up discounted units in new launches. We have seen many of such cases at our property launches in recent months.

3. Retiring baby boomers are contributing to this mini-bull run. These cash rich retirees, holding pension funds between $300 – $600k are quite numerous.  Several of them are still holding out, waiting for good opportunities to arrive. While others are willing to fork out a small amount to purchase small 2 bedroom units in prime locations – like The Arte @ Thomson or at Mi Casa in Choa Chu Kang.

4. En Bloc millionaires. There aren’t that many of them, but I reckon that there would be at least a few thousand of them still running around Singapore still holding on to their million dollar cheque. Many of them have been bidding their time, but should be buying their new house between now and 2010.

I think that yes this rally does seem premature. Many property investors are still trying to  believe it. But truth to be told, this rally is not across the board. Only certain properties are very popular, while others are facing dismal sales on a daily basis. The secondary market is still insipid, and still waiting for that much needed impetus to get some momentum.  I would say that buyers today have easy access to more information today than 10 years ago at our last financial meltdown. They will know when someone puts the cart before the bull.