Saturday, June 05, 2010

Will Property Prices Fall

Moneylife article

Housing prices are again reaching for the skies; demand is stagnating. How much should prices fall for the market to be reasonably valued? When can that come about? Moneylife reporters and analysts offer some answers.

If the current trend continues, it is likely that Mumbai will soon see stagnation in property sales; so will Bengaluru, Delhi-NCR and other metros. Teaser home-loan rates notwithstanding, buyers are showing no eagerness towards committing to their cherished new homes. If prices continue to spiral northwards, will buyers be eventually priced out of the market? Will we witness the bursting of yet another bubble or would that be just a temporary phenomenon?

Pankaj Kapoor believes that the government is actively fuelling a property price bubble in Mumbai. “The Mumbai Metropolitan Region Development Authority (MMRDA), in its own plans, says that increasing the valuation of the land sold is one of the key objectives. It is the government which is creating the bubble,” he asserts.

This is where the problem lies. Inflation is now touching almost 10%, prompting the government to gradually roll back the earlier monetary stimulus measures. Interest rates are expected to go up further. It is worth noting that every 0.5% increase in interest rate reduces home loan eligibility by approximately 7% (by making home loans costlier and also by reducing the eligibility of the lower-income segment).

In this scenario, what should home-seekers be doing? Many of you would be looking out for that cherished new home that you have wanted for so long. Does it make sense to take a plunge at these prices? Not if you are smart. Many buyers have postponed their home purchase decisions in view of the steep appreciation in property rates. Wait a bit for prices to cool down and then make a move for that dream house.

45 comments:

Jayant said...

It is a matter of liquidity/cheap money. These builders have got easy access to the cheap money and they have been successful in luring the foreign investors to invest in Indian Real Estate sector.

On top of that they have got the strong political patronage. Let the stock market plunge,the foreign investors flee and then we will see this Housing Balloon bursting.

Builder lands Pawar in IPL fix

Mumbai, June 4: Aniruddha Deshpande, the managing director of a construction company in which Sharad Pawar and his family have a stake and which unsuccessfully bid for an IPL team, is among a clutch of powerful builders said to be close to the politician .

The Pawars — the agriculture minister, his wife Pratibha and daughter Supriya Sule — own 16 per cent of the shares of City Corporation Ltd through a couple of family-owned companies. City Corp, of which Deshpande is boss, had vied for a franchise at the March auction but emerged fifth in the race.

SabbalSeshu said...

Will property prices fall ???

I've been in real estate business for the last 2 decades and witnessed the upheavals in the market. My honest opinion is that prices may stabilize but unlikely to fall from the present level. The demand for good accommodation far exceeds the supply. People hoping for the bubble to burst are living in fools paradise as the bubble is only imaginary.

Now, coming to foreign investors. Who are these investors ? They aren't foreign though holding citizenship of different countries. NRI indians want to invest in India and ultimately settle down in their home country. An Indian may be a billionaire in a foreign country, but socially he is just like an untouchable. All Indians settled abroad know this and hope that their off spring will atleast make it to their native land and lead a dignified life. Our country is developing fast, and this is their opportunity to make their future secure. Mittal has all the money in the world but is seeking a foothold in a backward state like karnataka. Why would he invest billions in a uncivilized state. He may be feeling at home in karnataka than his posh palaces in London or Switzerland.

If you really want a home, now is the time to plan. Prices aren't going to go southwards.

shayna said...

Sabbal seeshu,

I am one of those NRIs that you mention. I am trying actively for the last 4yrs to relocate to India, unsuccessfully. One of the reasons for my apprehensions is the cost of living in India. RE being the main catalyst for this increase in COL.
LNM is a very successfull man and will live in London the heart of global wealth, India is another inv dest for him, probably a bit more too.
Ref other NRIs like myself, though i wont claim it to be the absolute barometer, my interaction with friends and relatives tell me about the state of affairs in India. Among over 2dz family friends and 4 brothers i am the only one keen on relocating to India. The rest have come to realise that the west inspite of its immoral cultural vaccum still offers a better life i.e. Safe, secure and healthy. My kids are assured decent education at the states cost here in U.K. I am assured medical and with minimum wage can afford to pay for my mortgage.
Being a aircraft engineer, i am seeking employment back in DXB where i was working in the 90s. The sad fact is there are plenty of jobs going in DXB in various sectors but house prices are down but the reverse is happening in India. Jobs are far and few between but RE and related costs are just inflating.
Am originally from Mumbai, tell me where is the jobs in BOM. Every industrial area of BOM has been turned into housing devlp, so where are the jobs being created to house these ghost apt owners.
I fail to see the tangible evidence. I know for sure L&T are heavily invested in Coimbatore ad Kanpur, they are looking at unwinding Powai for Hira to takeover.
BOM airport is at saturation point and will be moving to Panvel, once ops end here JUHU, S'CRUZ, PARLA,BANDRA will go Newyork. BPT is losing to JNPT, Next they will offload land that will see further skyline getting covered. These areas are far more sort after than Thane, Chembur or Goregaon. So what does it do to prices.
BOM undoubtedly attracts a lot of slush wealth from around the country but for how long. House prices in BOM have risen by nearly 200% in the last 5yrs whereas wages have seen reductions of 20% lately.
DXB was the corrupt money park for most of Asia and Africa, prices have nearly halved over there but BOM does not seem to show any signs of strain and so doesn't, Nagpur, Indore, Pune, Nashik etc etc.
I purchased a plot of land in coimbatore in 2005, the next year RAKINDO a Ras-Al Khaima based co alongwith the Maran bros announced a SEZ right next to my plot. The thing was ment to start up in 2008. Till date no sign of life there. My inv has undoubtedly doubled but if i were to see the promoter he would be quoting 500% on the price i paid in 2005, simply quoting RAKINDO.

Going by the recent past data, i will say you are spot on in predicting further price rises however i would beg to disagree as India is undergoing phenomenal changes economically, socially and culturally. All of these changes mirror more of a western lifestyle and hence my belief that RE in India will see a developed world style correction.

Anonymous said...

Shayna,
well said. You have summed up very well all the factors which affect an NRI's outlook towards India. I am in Mumbai now and I can see a lot of redevelopment in Parle, Santa cruz and other older areas. In these areas there are a lot of Gujju/Marwadi businessmen who invest in developments at a pre-launch stage. The end-user ends up paying 30% more due to this. However this is a perfectly legal way to carrying out business except that half of the money is paid is cash. Until black money exits the system, there will be no systematic correction. However I don't see prices rising about 10k in most locations barring few.

The investors I speak to are smart as well. They don't want to spend 1cr to get 20L. they would rather spend 40L to get that 20L

Jayant said...

Foreign investors e.g. Hedge Funds,PE firms the great speculators like George Soros alike Indian Banksters Deepak Parekh ( ‘strategic advice about how to raise money via various routes’) etc are providing all the liquor to these Real Estate drunkards.

If you are thinking that it is the NRIs (mostly US/UK) who are fuelling the bubble then rethink about it. They themselves have dug into the massive home loan. Most of them are "Under Water" with negative equity in the homes. They have been struggling with all kinds of loans i.e. Student Loan, Auto Loan, Medical bills etc. Please check the following links. The average American worker is out of work for six months and 43% of them have less than 10k in retirement saving. And yes of course the NRIs are part of the US workers. The IT guys and NRIs are out of market and now it is just the speculators with the strong support from Reserve Bank of India who has allowed the banks to hide the losses in the garb of "Re-structuring of the Loans".

The touts from the pink media are screaming the jobless recovery when the subprime mortgage crisis has spiraled into the other crises i.e. Prime Home Loan crisis, Student loans etc. If there is a recovery and growth then why the Fed rate is at 0 - 0.25%.
Genuine home buyers please be patient and dont be the proverbial monkey .


43% of American Workers Have Less than 10k in Retirement Savings

Statistics from the Employee Benefit Research Institute
It seems that workers have had more trouble than ever saving for their nest egg, whether it be in the 401(k), IRA, or savings account. Some statistics from the Employee Benefit Research Institute are very telling of the state of today's American workers and their ability to save for retirement:

~ 43 percent of workers said they have less than $10,000 in savings in 2010. This number grew from 39 percent in 2009.

~ 27 percent of workers said they had less than $1,000. This number jumped from 20 percent in 2009.

~ 69 percent of workers said they saved for their nest eggs in 2010. This number dropped from 75 percent in 2009.

~ Only 16 percent of respondents said they have confidence in their ability to save enough for a comfortable retirement. This is the second-lowest point in the 20-year history of the survey.




Placing the Blame as Students Are Buried in Debt


By RON LIEBER
Published: May 28, 2010
Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she’s been enrolled in night school, which allows her to defer loan payments.

This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.



long-term-unemployment-at-highest-recorded-rate


By Annie Lowrey 6/2/10 10:28 AM
Sara Murray of The Wall Street Journal highlights one of the worst facets of the unemployment crisis: Nearly half of the unemployed — 45.9 percent, or 7 million people — have been out of work for more than six months , the highest proportion since the Labor Department started tracking the statistic in 1948.

Anonymous said...

Shayna,
You say it right. Prices are rising but everyhting else is either same or going down in the toilet.

Sabbal,
You have been doing RE for 20 years and don't you see what has happened in the past 4-5 years. I think you are the one living in fool's paradise.

The RE price bubble in India is massive and will burst with a big pop. I think all people are fools who are buying which is majority of the population. They all feel they don't want to be left behind and make money while prices are rising as RE never goes down.

All these price rises will become history for India in the months to come with a 60-70% fall in prices. Where are all those fools who prediced Sensex going to 40,000. I think it is going back to 10,000.

Nothing can sustain on borrowed money and steroids (stimulus) for a long time. Look at all other countries that followed Keynes theory and are failing. I think Keynsianism is dead for a long time. Indian policy makers are fool enough not to realise that yet. By the time they realize, it will be too late as masses will come out on street like Greece.

Anonymous said...

Jayant:

What are you drinking nowdays. You are so true in your posts.

Indians are not able to get it. They will get it only when they get a danda. Otherwise "All is well" for them.

Anonymous said...

Six Giant Banks Made $51 Billion Last Year; The Other 980 Lost Money.

An oligopoly of Goldman, BofA, JPMorgan, Morgan Stanley, Citi and Wells Fargo is flourishing. (Forbes)

Focus hard on this shocking Wall Street reality: The top six bank holding companies earned an aggregate of $51 billion in pretax income in 2009. We’re talking about JPMorgan Chase, Goldman Sachs, Bank of America, Morgan Stanley, Citigroup and Wells Fargo.


These are the banks that coined the term "BRIC" (from GS), and the whole idea was to make money by putting retirement funds of US taxpayers in emerging economies stocks. Anytime they will take the money out causing massive drops in stocks of emerging eco.

Anonymous said...

India could be lying like Hungary???

Hungary Warns of Greek-Style Crisis

PRAGUE — Fears that the debt crisis could migrate to central Europe were stirred Friday after a senior Hungarian government official said the previous government had manipulated budget figures and lied about the state of the economy, but most financial experts dismissed the remarks as a ham-handed negotiating ploy.

His comments followed similar warnings on Thursday by Lajos Kosa, a vice president of the governing center-right Fidesz party, and other officials that Hungary was in danger of suffering a Greek-style crisis, with budget deficits — officially 4 percent of gross domestic product in 2009 — possibly reaching 7.5 percent of G.D.P. this year.

sr said...

Some truths about NRIs....yes, NRIs did buy apartments 10+ years ago in Indian cities, when it was far more affordable at 1000-2000 rupees per sqft. They bought them mostly to provide a better house for their dependents back in India to live in. I can honestly tell you, as an NRI myself, there is no way whatsoever that I can afford to buy the same size apartment today. NRIs in all the Western countries and even in the middle east have seen little income growth, because "developed" countries have little inflation and more balanced job and income equality in their societies. NRIs cannot even dream of buying single family homes with land in India, and should not, too. It is at least 10 times more expensive in India than in the West, so why bother? Also, NRIs are NOT going back to India to find more acceptance. India's extremely corrupt society is not the place that they want their kids to grow up in. NRIs also get far superior education in the West for their kids, while all teaching in India is really poor quality. Kids in India just memorize stuff for exams without understanding absolutely none of the subject matter. No wonder there is no innovation in most fields like technology, medicine despite having this huge so called brain power in India. The reasons real estate prices have gone up in India, especially in the past 5 years, has been immense speculation, vast re-deployment of black money, and high inflation. China has also experienced similar hyped up growth, and I finally see the whole world realizing the immense bubble in China. It is only a matter of time before the even more ABSURD bubble in India is discovered.

Anonymous said...

NRI's have least to do with the spiraling real estate prices in India. If at all they have bought properties, it is for their loved ones to live and not with the intention to cash in in a beggar economy. The root cause is the corrupt regime in India who would do anything to bolster its name in international circle even at the expense of starving population. If you have watched the movie 'slum dog millionaire ' you would realise the actual situation. In my recent visit to mumbai, I witnessed the pathetic scene of people prevented to enter a mall in mumbai just because they were poorly dressed. This sort of situation is unthinkable in North America.
If one takes a survey, I am sure 100% of NRI's would vote for India is the least desirable place to settle in. SabbalSeshu, you are dead wrong in your assumption.

Anonymous said...

Sabbal is a jackass with 20 years of foolish experience living himself in a fools paradise. Loser.

RUpee is going to be 52 per USD inthe coming months as India's deficit is rising and EU is going down plus FDIs would stop. FOreign investors will strat pullin money out of India at a faster pace than thought.

All this growth story is fake, based on keynsinism which has failed. India is full of people like Sabbal who are sitting with their head in their arse and can't think rationally.

Anonymous said...

June 7 (Bloomberg) -- India’s rupee may slip 2.4 percent this year to the lowest of Rs.50/USD as funds favor safer investments than emerging-market assets, worsening the nation’s current-account deficit, according to Kotak Mahindra Bank Ltd.

The currency, which dropped 4.1 percent this quarter in Asia’s second-worst performance, may weaken to 48 per dollar as overseas investors pull funds from Indian stocks and bonds, said Mohan Shenoi, head of Treasury at the Mumbai-based bank, which was the second-biggest arranger of domestic stock sales this year. Foreigners sold $2 billion more local shares than they bought in May, the most since October 2008, official data show.

Anonymous said...

RBI is finally recognizing the RE bubble:

According to the report, RBI should start compiling a realty index and update it every quarter. To begin with, the report has proposed Delhi and Mumbai where property prises have skyrocketed to record levels. After these cities RBI would add 10 other cities which include Greater Chandigarh, Pune, Chennai, Bhubaneswar, Hyderabad, Jaipur, Kolkata, Lucknow, Bhopal and Bangalore.

MAssive bubble has to deflate. RBI better get down to work.

Anonymous said...

India housing bubble is set to burst pretty soon.

50-60% price drops are guaranteed. Wait for Sensex to drop first. Rupee going back above 50/$ and unemployment going higher in India.

Anonymous said...

guys prices are not going to fall. Yesterday, I went to hiranandani estate thane, they just increased house prices by 10% a week ago and on top of that no apartment is available for sale there.

they are further launching projects next year which will be priced 10% higher and they are already getting booking for it.

prices are not going to fall. buy if you want to live yeah, they will not double in next 5 years.

jay

Anonymous said...

BB, what are your views. Kindly advise.

Rahul Bajaj said...

Prices are going to fall when people stop buying. In a city like mumbai, all constructed/under construction apartment buildings are sold out. How can we expect the prices to fall.
I don't believe in this bubble, gibble story. This is all about black money earned through corruption. A flat costing 10 lakhs 5-6 years back is costing 1 cr now and people are buying. Where is the money coming from ? Most corrupt are the magistrates/judges followed by police, income tax and then other government employees. When law makers are corrupt, how can people expect price control

Again I am saying . Dont believe in bubble, gibble story. Those who are talking about other countries like uk, greece, usa, japan etc are patients of schizophrenia

Jimy said...

I believe the civic body should pass a regulation whereby residential properties should not be allowed to sell for a minimum of 8 years from the date of purchase and a minimum of 4 to 5 years not allowed to give on rent or lease basis.

I believe the whole bubble will definetely break if such policies are pressed with immediate effect. And I believe investors are smart enough to take another route to make money rather than blocking there money for for so long...

Hundred Dollar question is will the corrupt babus and politician really want people to have a breather..... definetly doubtfull... isn't it.

Down Down Congress Party and Policies, which make only politicians and power hungry greedy people succeed.

Regards, Jimy Jerin

Anonymous said...

@Jimy

How can such a rule be implemented in a democracy. As Rahul Bajaj said, people are buying at exorbitant prices. When buyer are abundant, why would sellers reduce the prices. The government can curb the black money which they will not as most black money hoarders are part of the government.
There is no easy way out. As the disparity between wealthy and poor increases, things like crime , extortion etc will also increase.

Welcome to fast developing India

Jimy said...

Residential infrastructure is a need to the common man and should not be considered as luxury and given for investors interest. If investors are to be kept away, I see the only possible means it to put capping as the government policy of land sealing. Bring new regulations and make way for the desperate buyer.

People who are part of city have every right to own a home for himself and his dependent family. But the rates prevailing in the current reality market is just not in the reach of a middle class family. What are they suppose to do?
Its accepted that demand and Supply forces decide prices in open market, but my friend, you should realize this is fake demand and government is boosting it and pushing peoples mind to make instinctive buying.

Local parties like the SHIV SENA and MNS always have many unwanted agenda on there list against the ruling government, but are not willing to take the most important agenda of housing. "Amchi Mati Amchi Manasa", such statements are to earn vote, make people fight against each other but never had I seen any party who wants to work for the well being of people at grass level, whom he calls "amchi manasa"... What a pity to the satanic will of our dear politicians.

If you have a detailed look into raise of salary in the last 4 years, the average appraisal year on year has not been more than 20 %. Whereas property rates have seen the skies, about 400% and still moving higher. I don't understand, where is the money coming from. Its failure of the existing government body who are not able to stop and bring corrective actions.

I believe you need to look it from the consumer point of view and not take a investor point of view, who cartel the whole reality market.


Regards: Jimy Jerin

Anonymous said...

Dear Jimy,
Your frustration is well taken. You are not alone who is frustrated. Many of us are.

This RE bubble has been created by the GOI under guiding principles of Alan Greenspan and John Maynard Keynes. The whole idea is to borrow more, spend more, spend a lot in infrastructure and keep rates low so that there is massive liquidity in the market which will in turn increase consumer spending. On top it GOI still has the stimulus in place and the doubling of salaries of millions of GOI employees was also a part of stimulus to increasegrowth and consumer spending.

Now, it is going out of hands. They themselves don't know where to stop. AQll the growth in the past 4-5 years is not real and organic but based on steroids from GOI.In this process cartels and collusions of bankers/builders/realtors have formed which are trying to keep prices high as they all benefit from high prices,not a common man who wants to buy.

Those things like roti,kapada aur makan are history. GOI doesn't care if inflation is high which means roti is high as they don't want to crush the growth India has seen in the past 4-5 years due to low interest rates. They are very very reluctant to raise rates and the G-20 meeting also talks about keeping rates low, especially from Tim Geithner, US.

And these Govt. idiots don't even count RE prices increases in their inflation statistics. It is all a rigged game for people in power or people who are connected to powerful. Normal people like me can only whine and wait...wait..wait...till we die.

Anonymous said...

Buy more RE in Mumbai. For your crores, you can be packed like sardines, one on top of each other and get to watch beautiful view of people defacting everyday and get to smell the aroma of shit all around you and die of cancer with the air pollution. Glad I left for videsh...Not rich but happy where I am

Anonymous said...

As an NRI, I am scared to go back to Mumbai like places. Traffic jams, smoke and noise pollution, high cost of living, nasty people, red tape, corruption, water shortages, electrical outages, almost zero greenery, people defecating in the side walks and seas with high fecal content, lack of fresh vegetables...the list is endless...

To compound it prices like 2 crores for a decent accomodation....why would anyone want to pay that much money and end up like that? Compared to the US where everything is so much more convenient and one can almost hear the blood rushing through one's veins...

Krishnan - NY said...

Amazing news:

World's tallest residences will be Lower Parel
Link:
http://www.dnaindia.com/mumbai/report_world-s-tallest-residences-will-be-in-lower-parel_1393307

Apartments are going to cost from 8cr to 40 cr. but when the building is readt it would be 16 to 80cr!!!!!!

Mind boggling. I am too stunned to write anything further.

Anonymous said...

anon@6:19
When people dream up such stupidities...one can be assured that this is the height of the bubble! This site will be lying empty for the next 15 years...

Anonymous said...

100 cr for 1 flat!!!!!!

Those who understand Hindi, here is another link

http://www.ndtv.com/news/videos/video_player.php?id=145646&from=homePageWatch

100 cr = US $200 million

The per capita GNP rank of india is 175 out of 224 just in par sudan, senegal, east timor etc. In a city like mumbai 75% of the people dont have access to toilets and defecate on roadsides, highways and parks. Who would buy a flat paying $200 million and live in filth and squalor, I wonder.

This will definitely find place in Ripley's 'Believe it or not' show

Anonymous said...

Actually 100 Cr. is "just" 20 million, not 200 million.

Still a bomb

Anonymous said...

Folks who compare US and India, US population is 300 million, India's population is 3 times of that.

And the land available is much less as compared to US. No point comparing US and India.

Not for nothing, India was 'Golden Sparrow' since ancient times.

Why the whiners just accept this fact - The housing price is NOT going to go down. Your salary is NOT going to go up. There would
be mismatch all the times.

Anonymous said...

Anon above,
India's population may e three time but look st the per capita income. 900 million people in India are poor living on $2 a day.
There is indeed no comparison.

India has a massive bubble.

Anonymous said...

Population of USA 300 million. Land area 9 million sqkms=900 million hectares = 2500, say approx 3000 million acres.

= 10 acres per person.

Area of china same, population 1.4 billion

= 2 acres per person

Population of India 1200 million, land area 3 million sq km = 300 million hectares = 700 million acres.

= 1/2 acre per person.

sr said...

While population of India is 3-4 times that of the USA and land area is one-third, that by itself does not explain "high" demand in India. In the USA, land use is very highly "zoned", and you cannot just build a 10-storey apartment building whereever you want like you can in India. There are zoned areas that for example say one independent house per 10,000 sqft of land. Also, joint family system is non-existent in the USA. Even parents do not reside with their grown up children. In India, it is still common to have 5-6 people per household. In essence, India and the USA work out to the same thing for land and population based comparison.

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Nimitt said...

Nimit Patel

Many people are not feeling there is a housing bubble in India. I personally feel there is an housing bubble.

Let take an example. I am living in baroda, gujarat so lets take an example of baroda city. J P Infrastructure made an flat - ISCON Attire in baroda, 2300 sq ft, rate is 65,00,000 Rs.

still flats are sold. Who can afford this? i dont know but at least a person who earn 1,00,000 rs a month can only afford.

My Thinking is different. Suppose you are living with your wife. Both are doing a job and your salary is 6,00,000 per year per person.

You total earning will be 12,00,000 rs a year. Suppose you buy a house cost 40,00,000 rs then your EMI will be near to 40,000 rs per month for next 20 years.

You are getting salary on hand of 80,000 rs per month after tax and PF. out of that you will do Monthly average 30,000 expense for living in baroda ( inc some amount of yearly tour, taking care of parents etc ) and there will be 40,000 rs of EMI.....

so what you will left in yr hand ?

just 10K per month? yearly saving of 1.2 Lakh rs????

I dont want to buy home then....

I will invest 50,000 rs every year in 8% NSC... or KVP... 6Lakh this year... same amount for next 5 years....

with interest it will reach nearly to 40 Lakh...

Till now my future is secured... what else i want???

just saving EMI... i can make 40,00,000 rs in next five years???

then why should i buy home as of now... this is showing housing bubble...

USA : Median house price is $200,000. Per capita income $44000. Two earning people in family and yealy income comes to $88,000/// that means in next three year earning u can have home in USA....


India... 40 Lakh house price... per capital income of India... 45,000 Rs.... 2 earning member... around 1 Lakh rs yearly income...

40 yeras is payback period ...

this is showing there is bublle...

A Graduate in USA will earn at least $7500 a month... so $90,000 a year... if husband wife is earning then there will be total some of $1.8 Lakh...


in india an MBA or engineer earns around 500,000 rs a year... and house price is 40,00,000.... ( In India you will not get many couples where huband wife both are earning good amount like USA )

this is showing housing bubble...

Anonymous said...

Hi All,

I am doing some calculations to find out if there is any housing bubble or not. Any Idea where I can find the historical housing cost data? If anyone knows please do e-mail me at support@bullshouse.com. I would really appreciate your help.

Thanks

Anonymous said...

THE REAL QUESTION IS NOT IF BUT WHEN INDIA PROPERTY PRICES WILL FALL. SELLING BEFORE THEY PEAK, OR AT LEAST NOT BUYING MORE IS THE KEY. ONCE THEY START COMING DOWN ( NOT SURE WHEN) THERE WILL B NO BUYERS LEFT. EVERYONE IS BUYING THINKING THAT PRICES WILL CONTINUE TO GO UP. ONCE THEY STOP GOING UP OR WORSE,START FALLING; THE COLLAPSE WILL BE DRAMATIC. THIS HAS HAPPENED BEFORE. WORST HIT WILL BE PEOPLE WHO BOUGHT WITH BORROWED MONEY-FROM BANKS,FROM PPF AND FROM PARENTS....

Capital Allocator said...

another way of looking at a bubble is: what is the risk of buying today?

IF PRICES HAVE NOT GONE UP IN THE LAST FIVE YRS. OR HAVE GONE DOWN, THE RISK IS LOW - AS IN USA TODAY.

IF THE PRICES HAVE GONE UP A LOT IN THE LAST 5 YRS. AS IN INDIA TODAY, THE RISK IS VERY HIGH.

DO NOT RISK LOSING MONEY AND YOU WILL DO WELL OVER THE LONG TERM.

Capital Allocator said...

there was a bubble in bangalore real estate in the 80s-90s because : indians from Hong Kong were coming to Bangalore because of the Chinese Takeover. Sober Research showed that there were only 15,000 Indians in Hong Kong and a large percentage were staying put or going to England...
Bangalore Prices crashed when these facts became clear.
My fellow Indians, Please use your God Given IQ and do not be carried away by emotions and half-truths...

Capital Allocator said...

IN THE US EXPERTS SAY PEOPLE SHOULD PAY UPTO 3 TIMES ANNUAL INCOME FOR A HOUSE. IN INDIA PEOPLE ARE PAYING 10-20 TIMES THAT NUMBER. THIS MADNESS CAN GO ON FOR A LONG TIME' BUT LAWS OF GRAVITY SAY THAT THE MADNESS WILL NOT GO ON FOREVER.

THE 3 Is of INVESTING

INNOVATORS - BOUGHT IN 1991
IMITATORS - IN 2000
IDIOTS - BUYING NOW

Anonymous said...

Hope this bubble will burst soon.

Anonymous said...

all these NRIs are talking of sour grapes.....they left for overseas to think they would do good and now they are begging on the roads.

too late for them to come to India...where people are much more prosperous

Unknown said...

Well, there is a greater foo theory: "I'm a foll to buy at high prices hoping to meet a greater fool down the road who would buy at still a higher price."! RE prices in India gives a false impression of 'appreciation'. Why? Look at this:
The Rupee today (20.05.2012) is quoting near 55 a USD. 22% in the last 6 months. Which means that in the International market everything has gone up by 22% relative to the Indian rupee (that's us) It may fuel the property price by 22% in Indian market as this is the inflation. The person holding a propery thinks that the property price is appreciating which is rather an effect of rupee depreciating. Everything for him has gone up in India but he doesn't realize. This inflation fuelled by current account deficit is a big risk for banks. The inflation goes high, the RBI inceases interest rates(actually hand in glove with govt and speculators). The EMI goes up but the property owner fool does not realize that although his EMI may not have gone up but his tenure has gone up fron 20 years to 25 years! In most cases people will die before they could say that property was theirs. The signs are clear and evident. the so called stimulus has fuelled a never ending inflation cycle. Also, the corrupt politicians, bureaucrats, govt employees, Police, etc. are using the RE to park black money. Easy come easy go: they will lose it as the value of currency will be worthless and property will go bust. Also, whenever someone buys a property in India the breakeven cost rises immediately by 10 % on account of registry and other govt fees. This means that even the new buyer want to earn profit he or she will have to sell above 10% plus adjustment for time inflation(for passage of time) to earn profit which would be greater than 15% of the original seller's price giving a false impression that property price has increased. IT ACTUALLY HAS DEPRECIATED! Imagine 10% are the SLIPPAGE costs only! What would you earn from it???

rajni sharma said...
This comment has been removed by the author.
Bhatt Balmukund said...

Indian Reality spot chek in 2 word
Property price v/s rental yeild 1.5 to 2% per year
(Manintance and taxes has to pay by owner )
EMI - 13%

Bhatt Balmukund said...

Its bigest joke in entire world history that in india EMI is 13% and rental yeild is just 2% max on property price , Rental is clear cut berometer of property bubble rate bound to crash any moment fonce bulder start "Bhav fodna" just go for rental for 2/3 yr rental is chepest in India compare to whole world and property price is higest in the world take advantage of rental