Property is on a high

I have been reading alot of smart articles lately about how the stock market is being overpriced and how REITs have run up so much lately they're not worth investing anymore. These are exceptions among the multitude of bullish articles we are reading and I call them 'smart' articles because they dare to hold the differential insight, the reality or fundamentals of the matter that everyone else is ignoring.

Property/Reits

Property and Reits have generally made quite a good run up over the past few years. If you're one of those that entered the market early, whether in the form of stocks or real property, I'd like to congratulate you as you're probably sitting on a healthy sum of profits or paper gains. However, I'd also like to earnestly advise you to keep in mind selling them or better yet, to err on the conservative side and sell them within the year. 

Some points to note:

• Over the last 2 years people have been flipping properties and making their money from it. Such activities have since cooled down. Their mindset may be that they have already made the money and don't want to re-invest into property which have already seen an increase in prices and have uncertain prospects.
• The government has introduced several rounds of cooling measures. These cooling  measures dampen prices but do not level the property cycle. They merely flatten it preventing a less drastic fall in prices when the down cycle occurs.
• Any Reits or Development stock chart will show an amazing run up.
• Every tom, dick and harry is talking about property. Suddenly everyone seem to think they are experts and are super bullish on property, saying just how it is good. There could be some irrational exuberance affecting the pricing of today's property.
• REITs themselves are aware of the bullish sentiment and are using this opportunity to raise huge sums of capital by timely listing on the exchange on by one. They are aware that they will miss out on obtaining such capital on less bullish times.
• Small developers are no longer as active as say 2 years ago. Small developers are firms that buy over small pockets of land and then redevelop them to sell them at a profit.  They largely depend on debt funding from the bank and make their margins from selling the properties subsequently repaying their debts. They are usually family run businesses who are into wealth preservation and are thus acutely sensitive to any price movements or events that may negatively impact their finances.  A slow down in their activities is a sign that they are holding a conservative view, in light of a possible slow down. As small developers do not have large sums of capital to tide them over bearish property cycles they will stop developing before the crash comes. As their projects typically take 1-3 years to complete this might indicate that they believe a property turn around is due over the next 3 years.

Conclusion: Property prices are on a higher end of the cycle now with potential downside possibly vastly outweighing potential upside.

  

From my point of view, the property market now is on a high end and it might be wiser for those who are invested to withdraw their profits. Just remember that if the market falls the value of these stocks or physical property can fall greatly, say by half in a very short time . Assuming that if the fall happens over 3 days, many retailer investors will not be able to react quickly and have the value of their holdings fall by 50%. This would mean for them to just break even, their accumulated gain over the run up would have to be 100%.

If you are already sitting on sizeable gains and potential upside isn't as high as it used to be, why not consider the danger that you might lose all your gains and  just sell it now for a healthy amount?