Thursday, January 03, 2013

Watch Out Asia, Inflation Is on Its Way

Article Link

Inflation in Asia may be under control now, but prices across the region could soon start to creep higher, with India and Southeast Asia the most vulnerable, warns independent economist Andy Xie.

"At the end of the day, you have all this money out there. It's rational to expect inflation," Xie, a former chief Asia-Pacific economist with Morgan Stanley, said. "India is the most vulnerable. It cannot solve supply bottlenecks. Southeast Asian economies like Indonesia and Thailand too."

Inflation in India could rise to 10 percent and above 5 percent in Southeast Asia, according to Xie. He expects inflation in China to rise to 4 percent - doubling from where it is now.

High inflation in India meanwhile dogged the country's central bank last year and prevented it from cutting interest rates aggressively to boost a flagging economy. India's wholesale price index, the main measure of inflation, rose 7.24 percent in November from a year earlier.

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"In Hong Kong and Singapore, the issue is very much about interest rates. So it's going to be similar to 1998," he added, referring to the property bubble that burst at the peak of the Asian financial crisis.
House prices in the two cities could plunge by half if interest rates go up, he added.

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What will this do to Home Prices in India ????

84 comments:

Anonymous said...

Any idea why this is not a big news in India?

http://www.thehindu.com/news/national/5-billion-worth-us-bonds-seized-in-raids/article4266146.ece



Dreamer said...

RE prices will move upward because job market here in India is not showing any signs of slow-down or decline. If there are some visible job declines in IT and Auto only then you can expect some 5-10% decline in RE prices. Else keep dreaming. Prices may not increase at the same pace of last few years but will move upward for sure.

Anonymous said...

@Anon - "Any idea why this is not a big news in India? http://www.thehindu.com/news/national/5-billion-worth-us-bonds-seized-in-raids/article4266146.ece"

In all probability they are fake. A year or two ago, the swiss customs agent caught some Italians with some 10-20Billion dollars worth of bonds that turned out be fake.

@Dreamer - "Prices may not increase at the same pace of last few years but will move upward for sure."
But will they move up faster than inflation?

Anonymous said...

http://profit.ndtv.com/videos/the-property-show/video-will-housing-prices-continue-to-rise-in-2013-259811?pfrom=home-opinions

Anonymous said...

To the moron poster, why are you putting links to existing articles. Just shutdown the blog and stop wasting the internet

aam aadmi said...

I have no idea why it's not a big news. Maybe because people don't understand it's implications (if the bonds are genuine)

aam aadmi said...

http://timesofindia.indiatimes.com/tech/careers/job-trends/Infosys-cutting-up-to-5000-jobs-Sources/articleshow/17882204.cms

Infosys cutting upto 5000 jobs

From the article
BANGALORE: Infosys has begun sacking employees at the bottom of the performance pile, returning to a practice it adopted during the peak of the global economic crisis in 2008 and 2009, according to people familiar with the development.

Yup no slowdown here, move along.

aam aadmi said...

Correction to the above : Infy has now issued a denial

Anonymous said...

Interview with SBI chairman - http://www.business-standard.com/india/news/lunchbs-pratip-chaudhuri/494389/

From the article - "The biggest challenge, he thinks, is that people have started fearing lack of demand and are not investing. The pipeline is almost dry for new corporate loans as no new projects are coming up. “Big companies can withstand the slack for one more year, but their suppliers may not. If the visibility for demand remains poor, companies could start rationalising new project divisions, leading to job losses. That is when it will really start hurting,” he adds."

Anonymous said...

RE prices will move upward because job market here in India is not showing any signs of slow-down or decline. If there are some visible job declines in IT and Auto only then you can expect some 5-10% decline in RE prices. Else keep dreaming. Prices may not increase at the same pace of last few years but will move upward for sure

Agree 100%. If there are sheep to fleece the builders will continue to keep prices inflated.

If there is 0 sales for a couple of quarters, this party will be over real soon. And this scenario is not going to happen as long as hiring for good paying jobs (read IT) and pay hikes continue.

Anonymous said...

If economic inflation doesn't get you, inflation in crime will.

What's the point in spending crores when half our families (mother, wife, daughter / daugther-in-law) will be subject to constant harrassment.

Physical safety is important too, even more important than economic safety and living in multi-crore flats surrounded by filth is a recipe for disaster in a fragile society such as India.

Anonymous said...

whole world will fill the jitters, but not the Indian property market. Folks, you have CEO's, Ex Silicon Valley guys from San Fran sitting in Bangalore with millions, we are not talking 10 million, we are talking 100's of million, then you add the politicians and other coke sucker who milk the system, and you have a non property bubble in India. Price not going to go up, and it will not go down much. 99% of the folks will suffer, but these coke suckers will not take a hit.
Cities have no electricity, pollution all over the place, trash everywhere, hospitals all crowded, and a booming population. Not looking good for majority of the folks for the next 50 years.

Anonymous said...

left my job, bought 2 properties today. hoping to double in 2 years.

Anonymous said...

^ anon : So you are going to sit and watch value of your assets increasing everyday? Wow that's great. I hope you have enough money to go through the next 2 years until your assets double.
All the best.

Anonymous said...

anon @5:48pm

As long as the peasants stomachs are full, they will pay through the nose for everything else.

No Arab spring in India.

pratik jaiswal said...

Thanks for your post, its really nice that you share such knowledge here.
Seeing todays condition i suggest its best time to invest in real estate so that you can relax in future when price uplifts. There is service available on internet that provide nice deals and discounts on properties such as residential apartments, commercial apartments, shops on sale or lease. for details visit: http://www.indianprop.in/

Mangoman said...

Now the government suddenly woke up and try to make correct noises. After allowing the inflation to run amok through the country for the past 3-4 years, virtually spoiling all the economic parameters government is now trying to do damage control.

up to 20% fare hike in railways.
There will be huge hike in diesel ( That is what they say, finally if it comes 2-3 Rupees, we mango people will he happy, they knew that)

Now coming back to our favorite doomsday scenario, I see increasing symptoms for crash now:

1. Car sales growth is down to 2008-2009 level. Since this time, the slowdown is much more broad based I am sure it will go to negative in 2013. Some of the car companies may shut shop and go out from India.

2. IT companies are not doing any mass campus hiring like previous years and planning to do some namesake campus hiring only. Pipeline of business is not too great.

3.Since government is trying to augment resources at every level, ( tax hikes are possible) people will not spend much.

4. Real estate brokers ( brokers includes banks) cannot expect robust growth this year. I think 2013 may be the bust year for real estate

5. Stock market is gonna to crash which will bring real estate down with this. This year it would be interesting to see the sellers only market without any buyers both in shares and real estate. Stocks are already showing initial signs of reversal.

6. With Rupee at 55 against USD, if rate cut comes, it is not gonna to do any good to the government or RBI's reputation. Let RBI takes a decision. But for doomsday scenario whether rate cut or not, doomsday is gonna to come

7. With no new job openings, with no new avenues to make money ( we sold all natural resources already), and without any wage hikes how can we float ponzai schemes such as real estate etc?

Anonymous said...

Indian stock market is expensive, when you compare it to other countries, and it could go down 30%, but Real Estate price not going come down. All the ELites have have millions and millions of $$$$$$$ cash in the bank + they have real estate. EBAY trying to buy 5% stake in SNAPDEAL for 300 million dollars. I will bet you that atleast 50-100 million of those 300 million goes into some real estate deal.

Anonymous said...

@Anon - "EBAY trying to buy 5% stake in SNAPDEAL for 300 million dollars."

No. Eaby is trying to buy a 5% stake in SNAPDEAL that 'would value' it at 300 million. i.e Ebay will invest around 15 million for a 5% stake.

It does not mean that Snapdeal has 300 million to throw around. It is simply valued at that price.

Anonymous said...

@Anon - "Since government is trying to augment resources at every level, ( tax hikes are possible) people will not spend much."

Yes, expect tax hikes (both direct and indirect) in this budget.


Also the below article talks about the government now desperate to avoid a downgrade. If that does happen, interest rates will have to be high or higher to save the rupee.
(http://blogs.economictimes.indiatimes.com/YieldCurve/entry/is-a-downgrade-imminent-fare-hikes-and-tax-for-super-rich-suggest-that-it-may-be)

Anonymous said...

super rich that you mentioned is >12l !!

http://www.rediff.com/business/slide-show/slide-show-1-us-formula-to-tax-indias-super-rich/20130109.htm

Builders in Chandigarh said...
This comment has been removed by a blog administrator.
Property in Chandigarh said...
This comment has been removed by a blog administrator.
Anonymous said...

ok

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aam aadmi said...

Anyone else think that the number of spam comments from RE pimps on this site have increased lately ?

Anonymous said...

ok

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Anonymous said...

remember real estate prices will double every six months until you are no longer able to afford it. After that it wont matter.

Pawan said...

@anon
remember real estate prices will double every six months until you are no longer able to afford it. After that it wont matter.

That is the reason for drop in traffic on this blog - it does not matter anymore.

Anonymous said...

The number of people buying the property have exhausted. Some people have bought 2-3 flats and paying the half of their EMIs through rent. One thing they are forgetting is to declare the flat is on rent and income through that. By not doing that they are making a financial crime as good as committed by builders while they take cash or cheque and do not report it income tax return (black money). Because as I remember correctly in Maharashtra you have to pay 25% of your rent income to municipal corporation as property tax. The rest 75% are supposed to be taxed as per the IT laws. So if you are being taxed in 30% tax bracket then your total of 47.5% of the income is gone (25% municipal + 30% of rest 75% =22.5%).
And even if you are lucky enough to get 4% of your property in rent you are left with 2.1% after paying all the taxes.
So you are left with appreciation of the property which is over longer term of 20+ years is just 10-13% CAGR in cities like mumbai and far lesser in 2nd tier cities.
Better to invest in MFs.
If you are property trader then you can gain in trading the properties but there is a danger of getting stuck in a wrong deal. And losses could be huge enough to wipe of all the previous gains.

Anonymous said...

Its Time!
Its Time!
Its Time!

For 10 years it was up,up,up
Next 10 years its time for DOWN DOWN DOWN

Read the article and i guess make a new thread

http://mobilepaper.timesofindia.com/mobile.aspx?article=yes&pageid=1&sectid=edid=&edlabel=MMIR&mydateHid=16-01-2013&pubname=Mirror+-+Mumbai&edname=&articleid=Ar00100&publabel=MM

It was common sense that it will happen sooner than later. I have seen enough to know that what goes up at a certain speed comes down at a faster speed.

It would be great to see Property Times(Mumbai) this saturday :) I believe it will be packed with price reductions

Anonymous said...

The above link - better viewing

http://epaper.timesofindia.com/Repository/ml.asp?Ref=TU1JUi8yMDEzLzAxLzE2I0FyMDAxMDA=&Mode=HTML&Locale=english-skin-custom&title=Builders blink, first price cuts are here

GSM said...

And even if you are lucky enough to get 4% of your property in rent you are left with 2.1% after paying all the taxes.

You should probably look the other way around. If the rental transaction is done with cash and you are in 30% tax bracket, your rental yield will increase to 5.2%. Make it 6.5% considering the income tax you save on home loan. And if anyone is noticing, rents have gone up at least 10% in Bangalore while home loan interest is dropping steadily thanks to Chidu. Looks like there might come a time with 8% interest on home loan and you have a 8% rental yield considering the above factors? Am I missing something?

Anonymous said...

nobody pays taxes in India, so do not worry about that problem. Infy is up over 50% from its low, TTM is almost at its 52 week high, Dr. Rdy is at its 52 week high. Top .0001% will cash out and buy more property. Laborers make 700rs per day, so if you want to construct a house, it wil cost you close to 1 crore.IT is what it is.

Cool Head said...

I don't think any of the salaried class pay rent by cash, they do by cheque and then claim tax deductions under HRA. So the statement that rents are taken in cash is not trued, at least for normal residential apartments, we are not talking about shops/jhuggi/jhopdis here. Commercial rents have actually softened in Mumbai due to the large vacant malls/office complexes/etc. although residential ones are up by 7-8% from last year tracking the inflation

Dharmendra Kumar said...
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Dharmendra Kumar said...
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Ravi Raj said...

What will this do to Home Prices in India ???? Yeah that’s the big question everyone is asking. Real estate experts are hopeful that in 2013 sales of properties will increase. New government policies in India for the real estate sector will be helpful in increasing sales. Prices in metros will continue to appreciate and even properties in Tier II cities will have capital value appreciation.
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Sanjay Sawant said...

In every Six Months price are getting doubled the rate. Real estate experts are hopeful that in 2013 sales of properties will increase. Competitor for Real Estate Property are increasing Day by day. Common man cant afford flats in cities like Mumbai, delhi etc anymore.

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Anonymous said...

indian economy will slow down bigtime in 2014 and that will cause the stampede of people exiting realestate.So look forward to significant falls in price next year

Suresh

Real Estate in Bangalore said...

Surprisingly, while home prices seem like increasing in a steady manner, the home loans interest rate is slated to fall soon. That will encourage more home buyers to invest in real estate. But Indian economy is fairly stable, because of a strong core sector. We should be out of inflation soon.

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