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Another Real Estate Downturn as in 2008

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Another Real Estate Downturn as in 2008

Last updated: June 28 2012
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  • Another Real Estate Downturn as in 2008

    While there was lot of gloom and doom predicted in the last couple of years since great recession of 2008, the market bounced back with vengeance and prices shot up to unprecedented levels. One of the main reasons attributed was positive sentiment in Asia and Europe.

    Timely injection of credit into market by US federal reserve and China central bank was also cited as key reason. The unwanted side effect though was high inflation in developing economies.

    We are once again confronted with a major credit crunch situation and this time central banks are reluctant to inject credit like they did before for fear of stoking inflation.

    The optimism that was there in Asia during previous crisis is now lacking.
    INR at all time low, lots of negative news, investor confidence is lacking, people are now doubting India's growth story, etc...

    I personally feel there is going to be a replay of what happened in 2008, it is going to be bit more painful for India for sure.

    What do you guys think?
  • #2

    #2

    Re : Another Real Estate Downturn as in 2008

    There are N number of threads on the forum discussion the same. Things are actually not very good. But until it comes, we will have to be hopeful.

    Comment

    • #3

      #3

      Re : Another Real Estate Downturn as in 2008

      Originally posted by Love4land View Post
      While there was lot of gloom and doom predicted in the last couple of years since great recession of 2008, the market bounced back with vengeance and prices shot up to unprecedented levels. One of the main reasons attributed was positive sentiment in Asia and Europe.

      Timely injection of credit into market by US federal reserve and China central bank was also cited as key reason. The unwanted side effect though was high inflation in developing economies.

      We are once again confronted with a major credit crunch situation and this time central banks are reluctant to inject credit like they did before for fear of stoking inflation.

      The optimism that was there in Asia during previous crisis is now lacking.
      INR at all time low, lots of negative news, investor confidence is lacking, people are now doubting India's growth story, etc...

      I personally feel there is going to be a replay of what happened in 2008, it is going to be bit more painful for India for sure.

      What do you guys think?
      ----------------

      Credit is like administering 'antibiotics' when one is down with viral fever cos his immune system is bad. While the 'antibiotics' ( credit) temporarily give some relief , antibiotics ( credit) will eat away body tissue ( economy).

      By far China seem to be the strongest economy today and they are very wisely managing it. Speculation is not allowed in China.

      Real estate down turn is not the crux. Entire indian economy collapse is the crux. And this is brought about by Indian Real estate.

      Comment

      • #4

        #4

        Re : Another Real Estate Downturn as in 2008

        I don't agree Indian real estate is cause of downfall, it is just symptom of what is wrong with Indian economy. Frighteningly high inflation and lack of investment option has forced people to park their money in real estate.

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        • #5

          #5

          Re : Another Real Estate Downturn as in 2008

          Originally posted by Love4land View Post
          I don't agree Indian real estate is cause of downfall, it is just symptom of what is wrong with Indian economy. Frighteningly high inflation and lack of investment option has forced people to park their money in real estate.
          -----------------

          of course you are free to have your opinion. Here is a leaf from fundamentals of economics.

          'What causes spurt in the cost index too causes economic collapse'.

          Every thing you eat, drink, wear, live, work, travel , kids education, medicals - every thing is connected to real estate. Every thing. Even funerals. Sad.

          Why they increase school fees every year ? ( some times twice ) . Because teachers want more salary. Because maintenance is costing more. The maintenance staff want more salary. Electricity costs more. Why ? Electrical stall want more salaries. Why ? they too want to buy properties .. .

          These people buy food from market. The vegetable vendor who wants to make more money ? Why ? He wants to buy a property ..lol . He has to pay rent. He has kids in school who pay fees which increase every year. Why ? cos teachers want more salary ? Why ? Teacher wants to buy a property. lol. See the logic ?

          Comment

          • #6

            #6

            Re : Another Real Estate Downturn as in 2008

            You are keeping property as focus point and using it as basis to explain cause of other events.

            I can keep something else as focal point and do the same, say for example excess liquidity.

            Leave the jargons, no point in trying to prove your knowledge of economics. Not all great investors are great economists. Academic knowledge is only stepping stone in succeeding in what we are doing, it is only a mean not an end.

            Comment

            • #7

              #7

              Re : Another Real Estate Downturn as in 2008

              [QUOTE=Love4land;457107]You are keeping property as focus point and using it as basis to explain cause of other events.

              I can keep something else as focal point and do the same, say for example excess liquidity.

              Leave the jargons, no point in trying to prove your knowledge of economics. Not all great investors are great economists. Academic knowledge is only stepping stone in succeeding in what we are doing, it is only a mean not an end.[/QUOTE]

              ---------

              Ok. Do you want to try liquidity ?

              And how you want to explain the opposite of what I had said above ? I did not say liquidity. You did.

              Any thing new is good to learn.

              in red is what you call 'jargon' lol

              Comment

              • #8

                #8

                Re : Another Real Estate Downturn as in 2008

                Why they increase school fees every year ? ( some times twice ) . Because teachers want more salary. Because maintenance is costing more. The maintenance staff want more salary. Electricity costs more. Why ? Electrical stall want more salaries. Why ? they too want to buy properties .. .

                These people buy food from market. The vegetable vendor who wants to make more money ? Why ? He wants to buy a property ..lol . He has to pay rent. He has kids in school who pay fees which increase every year. Why ? cos teachers want more salary ? Why ? Teacher wants to buy a property. lol. See the logic ?
                Just to demonstrate how I can explain the same using "excess liquidity" as root cause of all price increases:

                When money is printed in excess of its value, it doesn't end up in everyone's hands equally. Some people may suddenly find themselves having greater disposable income and in order to gain an upper hand, will outbid others when buying goods or services.

                For example, IT folks may suddenly get a huge payrise which is indirect result of credit infusion by federal reserve. They'll no longer bargain with vegetable vendor or real estate promoter or school management and instead will offer whatever price is quoted. This will shoot up vegetable, property and school admission rates.

                Comment

                • #9

                  #9

                  Re : Another Real Estate Downturn as in 2008

                  Now you may ask how the excess dollar printed by US federal reserve will end up with Indian IT employees.

                  Credit infusion was done to help US corporations recover from financial losses. The US companies (beneficiaries) will use the money to mend and optimize their business. One way of optimizing their business is cutting down expenses.

                  Staffs will be laid off in high cost location and more projects will be outsourced. Indian IT companies will be a major beneficiary. Now the money will eventually trickle down into hands of IT employees in India.

                  Comment

                  • #10

                    #10

                    Re : Another Real Estate Downturn as in 2008

                    Eventually price come down however no body can assert when!

                    RE is high discovered asset class and sellers won't come down with the price unless we see more stagnation or more resales. I anticipate more inflation issues due to coalition politics at the center. The price come down only if there is a major war or natural disaster.

                    Comment

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