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(Bloomberg Opinion) -- The house arrest of pandemic lockdowns seems to have thrown open the gambling switch in our brains.
How else to rationalize the frothy frenzy across asset classes globally, a madness so complete that the bankrupt car rental firm Hertz Global Holdings Inc. is raising up to $500 million by selling new shares after warning investors of the significant risk that their purchases will be worthless?
A bizarre markets rally is under way amid the worst unemployment scare since the Great Depression. It’s being led by day trading gurus for the coronavirus era, like Barstool Sports’ Dave Portnoy, who’d bought only one stock in his life before the quarantine but thinks Warren Buffett is “washed up.”
The hysteria isn’t limited to the U.S., or shares. Take the latest Singapore residential property data, which showed a 75% jump in new private home sales in May from the previous month. This at a time when new projects couldn’t be brought to the public and all viewing galleries were shut. What was going on here?
Singaporeans weren't leaving home and the city’s two casinos were closed, along with other outlets for spending money and relieving stress. So many went online to buy and sell stocks at a pace not seen since a 2013 crash in penny stocks. But that wasn’t enough, for the asset class that stands head and shoulders above everything else in the imagination of the space-constrained Asian financial center is property. And that’s where people shifted their attention. Or, as broker PropNex Realty CEO Ismail Gafoor says, buyers and investors adapted to digital modes of property marketing.
There’s a danger of reading too much into the Singapore numbers. The overall sales figure of 486 units is the worst May for developers since 2008. And it’s entirely possible that many of the 56 buyers of Treasure at Tampines — the bestselling condo development in the eastern suburbs — had done their on-ground research beforehand. Besides, the Singapore regulator has rules against dodgy tricks — such as very large balconies combined with tiny interiors — that give a certain credibility to what prospective customers see in virtual galleries.
Still, the real surprise is that the buyers paid a median S$1,360 ($979) per square foot, 2% more than when the units were first launched in March 2019. The more expensive Florence Residences, another suburban property that first started sales at the same time, saw a 6% higher median price per square foot across the 54 units that sold in May.
PropNex’s characterization of this unusual month as the “new normal” may be an exaggeration. It’s perhaps a not-so-new abnormal, in which people feel compelled to conclude transactions. In March, when the Covid-19 scare was beginning, I wrote about the Black Death in medieval Europe and how it had brought in a wave of consumption (and consumption taxes) because of a sudden feeling among survivors that life was indeed short. Is something similar going on here?