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Are Real Estate Prices Going To Fall 40% by Mid 2007?

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Are Real Estate Prices Going To Fall 40% by Mid 2007?

Last updated: February 21 2009
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  • Are Real Estate Prices Going To Fall 40% by Mid 2007?

    Anyone think that the prices of flats will fall 40% from the mid 2007 prices ?
  • #2

    #2

    Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

    psvjaya writes:
    Anyone think that the prices of flats will fall 40% from the mid 2007 prices ?
    Can you please explain the basis of your pre-assumption?

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    • #3

      #3

      Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

      If there was a normal growth in the property since 2003, we would have reached these price levels only ie., 40% below the current prices ....However, no property developer seems to reduce the prices eg., the hiranandanai upscale, jains etc.,

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      • #4

        #4

        Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

        Originally posted by mail1295
        The only reason i could think of prices of properties in chennai would fall to rock bottom is if sea level rises by 30 to 50 feet and engulf 10 to 12 kms into the city. Thats minimum 200 years away (considering extreme worst case scenario) and averagely 1000 years away (considering average runaway scenario)
        It might be interesting quote made here that the price fall may be 10% or less or no price fall. I think Chennai is already in 10% price drop zone and this is only the tip of the iceberg.
        I will be happy to see this person coming over and reviewing his/her statement in a years time. God bless

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        • #5

          #5

          Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

          Flat prices can fall in Chennai, not because of pink slips or global recession but because of the Second Master plan which allows better FSI. So land price factor will reduce. However even then knowing the con brokers of Chennai, they will like to keep the price up, while land owners like me will ask for more price for our land. So maybe the price fall will be minimal for flats. Now this is true in Chennai, which is CBD of Chennai. So if flat price falls in Tiruvallur or in Vayalur (there is this guy selling flats in Vayalur and calling that as Chennai!), that is not the discussion I am into.

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          • #6

            #6

            Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

            I am getting mails from the flat promotors intimating the price reduction from Rs 3200-3300 per sqft to Rs 2800 per sqft. About 15% reduction.

            That too now repeated calls & e mails, scope for further negotiation

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            • #7

              #7

              Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

              Are land prices falling in Chennai? Does anybody know what the average price per ground is in the kilpauk area?

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              • #8

                #8

                Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                Land prices should go up in Chennai with the new Master plan. It allows more FSI enabling at constant price of flat, more value for land. To take an example. An Ordinary building can now have 6 kitchens and can get FSI of 2 in place of 1.5. This means that price of flat being fixed land price has to sky rocket.

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                • #9

                  #9

                  Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                  Originally posted by ak15 View Post
                  Are land prices falling in Chennai? Does anybody know what the average price per ground is in the kilpauk area?
                  I spoke to few real estate guys to buy a property at Chennai.. When I call them they said prices are came down.. they further said you can negotiate and buy 30%-40% lesser than 2007 price.. But the situation is PRICES ARE FALLING day by day.. It will come down to 2004 rate it seems..this is the feed back from the people involved in real estate business..

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                  • #10

                    #10

                    Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                    Since when did flat prices remain fixed? And who fixed it?

                    Originally posted by Natarajg007 View Post
                    Land prices should go up in Chennai with the new Master plan. It allows more FSI enabling at constant price of flat, more value for land. To take an example. An Ordinary building can now have 6 kitchens and can get FSI of 2 in place of 1.5. This means that price of flat being fixed land price has to sky rocket.

                    This genius assumes that price of flats will remain fixed and therefore price of land will skyrocket. Since when was it mandated that price of flats will remain constant? And by what laws of nature (or of commerce) was it mandated as such? If he took the extra 2 seconds to consider, "what if price of flats declines?" (obviously the brain was too small to accomodate 2 pieces of information simultaneously), he would come to the shocking conclusion that the bets he took buying land at exorbitant prices thinking they will rise because "FSI increase coupled with flat prices remaining constant" is a BS logic which will take him straight to the doghouse!

                    For the rest of you people who actually use their brains (and don't think that everyone else who disagrees with them is a fool), please consider the following evidence and arguments.

                    CREDAI (no doubt according to this genius, they too are morons since it does not suit his argument) has "requested", actually mandated that builders reduce prices anywhere from 10% to 20% so that properties may start selling again - based on the arm-twisting by banks who are getting impatient with the money builders already owe them and are not able to repay since people have sharply reduced buying and the money is locked up in unsold property.

                    So, with property already in the 10% to 15% decline in various parts of the city, adding another 10% to 20% will take the decline to between 20% to 35% decline from peak.

                    Consider the worst case of a 35% decline as of today (assume builder is eyebrow deep in debt and simply cannot wait to sell). Assume FSI has gone up from 1.5 to 2.0 which is a 33.33% increase (is this ruling passed already? Or is it a fantasy-of-the-future in this person's mind today? ). The 33% increase in FSI is compensated by the 35% decline in price.

                    So, the price of land will skyrocket? The rocket just ran out of fuel on the launch pad itself !!!

                    This genius must first read up basic economics and laws of demand and supply - Economics 101 as one of us put it on a post. Supply has skyrocketed in the recent past (with builders, bankers and realtors all talking up their demand and buyers falling suckers to this argument that prices will forever increase in double-digits going forward. Ever heard of the greater fool theory? When the number of fools who bought overshadow the number left to buy, supply exceeds demand and prices will stagnate first and then fall as all other fools realise that their punt has failed and prices are not increasing anymore, so their bets will fail .

                    Demand is already falling sharply - the very fact that so many of you are holding back and confused about whether to buy now or buy at all, means demand has fallen significantly. There is increasing oversupply in the market.

                    Since everyone of us is optimistic (and greedy) by nature, we tend to be overoptimistic and like to think that the next month will bring cheer. But so many next months have gone by and no cheer? Why?

                    Based on the reading from the US - like it or not the US is the dog (consumers) and India, China and the rest are the tail (producers) - its going to be a longish wait and probably end in the 2010 - 2012 timeframe.

                    Since the tail can never wag the dog, if the US consumption falls sharply (and you will have to be blind and deaf to not figure this out by now) and ramains low for an extended period of time, we in India and China too will be forced to fall back on the Hindu Rate of growth or worse (to wipe out the excesses of the recent past) !!!

                    If this genius will take some time off to read the papers (keeping aside his prejudiced perception) he will notice that the second busiest ports in the US, Long Beach, is flooded with imported cars with importers leasing space around the port itself to park thousands of Mercs and things since no one wants them anymore; even dealers are refusing to lift stock since they have run out of credit!!!

                    Couple of days back, an article in EcoTimes mentioned that the port of Goa and many other ports are clogged with exporters as well as importers refusing to clear goods since no one wants them anymore (of course according to this genius all of those businesspersons must also be stupid, right?). We are realising (once again after several years of unsustainable boom) that its healthy trade that brings in prosperity to consume the fancy things we consume in excess (basic consumption will go on and provide us the Hindu Rate of growth anyways which is 2-3%). If economic trade declines, our growth rate will decline from the 7-8% to the Hindu Rate of growth in which case the RE price growth will also decline to the 1970s rate which is in the low single digits; but first it will decline from current prices to adjust for these few years of madness (and buying with bullshit logic like "Flat prices will remain fixed so land prices will skyrocket").

                    So people. It is very important to keep abreast of the news as well as to keep an eye (and most importantly an open and unbiased mind) on the evolving news and various arguments about where all this is headed and will end up.

                    IMHO, the RE decline continues to follow the chart I have already laid out (which is how RE declines have hstorically happened). Only, this fall will be steeper, deeper and longer than previous ones since the boom has also been so. If prices have fallen 10% to 15%, please realise that this must be probably 20-25% of the decline phase. So, the serious decline phase has to come still and we could see it last for 2 years (at least) from the peak; probably more in RE.

                    It is probably more important that youngsters concentrate on building their financial strength (by saving and maybe buying some Gold) so that they can buy property at lower loan proportions as well as maintain savings at a healthy rate. Remember, common logic is that your EMI must not exceed 35% of your take-home income, so that you will have enough to eat and some to put away. And this take-home must not be your peak salary of recent boomtimes. Rather take it as 5-year average to increase your safety margin (just in case your salary declines for a short period as it very well may ).

                    When property prices fall significantly (IMO around 50% or more) as well as stagnate for a considerable period of time to iron out the weakness among buyers, that would be a great time to buy since supply will be large and you will get lots of choice.

                    Flat prices don't remain fixed. Sometimes they decline too .

                    cheers

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