How do we know if the RE bubble in India has burst or is about to burst? The RE bubble in Japan went through this cycle, the RE in USA experienced the same. Some areas got hit more than others meaning RE dropped by 20% - 30% in some areas and 10% in other areas.
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  • Different class

    Originally Posted by wiseman
    You are welcome, Contra. Its free!:D

    To give you an idea about what happened to Japan - and how much worse its going to get for the US and as a corrolary, for the rest of us - here are a couple of charts about Japanese RE market as well as Stock Market.

    Enjoy!!! And remember that, however impossible people may think things can get, it can get worse than you think!!!

    I was following this when I started telling people in the US in 2006 itself to gear up for a Japan-like fall in RE prices in the US.

    cheers


    Interesting read, but there is the difference! Hold ON:D


    Japans population has been on the decline and greying -

    India has the highest working and pre-working age group of population

    India is in the sunrise sector of economy - knowledge based.

    Peoples expectation are yet to be satisfied be it housing/cars/etc etc...

    So comparing Japan with such a small mass and population dynamics to

    Multi nation India is not justified. ( comparing pts - population density )

    And there is the problem of black money. Remember India has perhaps the

    highest no.s or money in Swiss banks.

    Methinks: RE crash might not be possible in this basic amenities /aspiration / infra denied society like ours.

    PS Can some one give insight into controlled RE mkts of China a decade back for comparison.
    CommentQuote
  • My responses are below in maroon


    Japans population has been on the decline and greying -

    Between 1990 and 2007 when land prices were declining, Japan had a large middle aged working population. It was only after 2007 demographic studies showed people were aging and that by 2030 their could be more aged people in Japan. But japanese government was quick to react and now Japan provides a lot of incentives to have more children.

    Japan has longest life span with average life span particularly among women at more than 80 years. They need more housing definately as people live long enough to see great grand children get married:D.


    India has the highest working and pre-working age group of population

    This is a sad joke. 60K crores is farmer loan waiver was not enough it seems for this laziest population in the planet.


    India is in the sunrise sector of economy - knowledge based.

    Japan is technologically most supeiror nation in the planet. They are the first country to introduce 4G this year by NTT Docomo. India still doesn't have 3 G .

    Just the export revenue of Toyota, one company is more than combined revenue of WITCH (wipro, infosys, TCS, cognizant, HCL).

    Aren't S ony, Canon, NTT Docomo, Toshiba, Sharp etc. the best knowledge based companies in the planet. They invent superior products like LCD tvs, digital microprocessors etc. Japanese knowledge based company Sharp invented flat screen LCD TVs.

    Infact Japanese electronic product companies are hiring embedded programmers in bangalore..their knowledge industires are creating jobs for our youth:).


    Peoples expectation are yet to be satisfied be it housing/cars/etc etc...

    That is not the reason to charge Rs.10,000/sq.ft of land. In fact if land prices come down it is good for housing as builders input costs comes down. Even it is good for builders if land prices come down as they can cut final prices by 40% even while keeping their margins.

    So comparing Japan with such a small mass and population dynamics to

    Multi nation India is not justified. ( comparing pts - population density )

    Japan is 8th most populated country...that is not small mass. I have already said that population density in habitable areas in Japan are much higher than India. I even gave example of Korea who population density is double of India and yet had land prices crashing.

    And there is the problem of black money. Remember India has perhaps the

    highest no.s or money in Swiss banks.

    Are Japanese politicians so dumb and honest. Indians earn 6 Rs. out of which black money takes away 3 Rs. Japanese earn 24 Rs., even if black money takes away 12 Rs. So japanese have 3-4 times more black money :D

    Methinks: RE crash might not be possible in this basic amenities /aspiration / infra denied society like ours.

    Land prices coming down is best thing to happen for this country. Because input costs for builders / housing boards will comes down drastically which will in turn provide more affordable housing to people as builders can cut the final end prices by 40% while still keeping their margins.
    CommentQuote
  • Originally Posted by contra
    My responses are below in maroon


    Japans population has been on the decline and greying -

    Between 1990 and 2007 when land prices were declining, Japan had a large middle aged working population. It was only after 2007 demographic studies showed people were aging and that by 2030 their could be more aged people in Japan. But japanese government was quick to react and now Japan provides a lot of incentives to have more children.

    Japan has longest life span with average life span particularly among women at more than 80 years. They need more housing definately as people live long enough to see great grand children get married:D.

    India has the highest working and pre-working age group of population

    This is a sad joke. 60K crores is farmer loan waiver was not enough it seems for this laziest population in the planet.

    India is in the sunrise sector of economy - knowledge based.

    Japan is technologically most supeiror nation in the planet. They are the first country to introduce 4G this year by NTT Docomo. India still doesn't have 3 G .

    Just the export revenue of Toyota, one company is more than combined revenue of WITCH (wipro, infosys, TCS, cognizant, HCL).

    Aren't S ony, Canon, NTT Docomo, Toshiba, Sharp etc. the best knowledge based companies in the planet. They invent superior products like LCD tvs, digital microprocessors etc. Japanese knowledge based company Sharp invented flat screen LCD TVs.

    Infact Japanese electronic product companies are hiring embedded programmers in bangalore..their knowledge industires are creating jobs for our youth:).

    Peoples expectation are yet to be satisfied be it housing/cars/etc etc...

    That is not the reason to charge Rs.10,000/sq.ft of land. In fact if land prices come down it is good for housing as builders input costs comes down. Even it is good for builders if land prices come down as they can cut final prices by 40% even while keeping their margins.

    So comparing Japan with such a small mass and population dynamics to

    Multi nation India is not justified. ( comparing pts - population density )

    Japan is 8th most populated country...that is not small mass. I have already said that population density in habitable areas in Japan are much higher than India. I even gave example of Korea who population density is double of India and yet had land prices crashing.

    And there is the problem of black money. Remember India has perhaps the

    highest no.s or money in Swiss banks.

    Are Japanese politicians so dumb and honest. Indians earn 6 Rs. out of which black money takes away 3 Rs. Japanese earn 24 Rs., even if black money takes away 12 Rs. So japanese have 3-4 times more black money :D

    Methinks: RE crash might not be possible in this basic amenities /aspiration / infra denied society like ours.

    Land prices coming down is best thing to happen for this country. Because input costs for builders / housing boards will comes down drastically which will in turn provide more affordable housing to people as builders can cut the final end prices by 40% while still keeping their margins.



    Increasing population gives increasing demands.
    That also working/abt to work population means much more demand than a greying and old population ( span of life). Huge migrant population adds to this demand.

    Knowledge based eco
    KPO's, BPO's and allied industries in bio/med/IT are different than saturated tech companies with huge research budgets but miniscule employment potential. gives lesser demand due to lesser popultn involved

    Peoples expectation
    People r used to scarce developable land availability (low infra), ignorance of rules(insider trading ),Rampant black money transactions, unregulated markets, lack of alternatives. etc. They r now getting good houses and roads etc, but at exhorbitant prices thats another story. Migration / equalisation due IT/reservations etc. adds to the demand.

    Population density
    The India mass is huge and ballooning. Its like comparing Indian GDP/armed forces with American. We will fit in some of their states /commands ,though the situation is improving. Except for density no other points can be comparable.

    Black Money
    The RE is the best way/ channel to convert balck monies. Agreed American /Jappo have more monies (times ), but look at the absolute numbers of people involved. more people more demand.


    So different class:

    Methinks: RE crash might not be possible in this basic amenities /aspiration / infra denied society like ours.
    At best expect stagnation / some fall but no crash.
    CommentQuote
  • This time I will have to agree with Contra a little more!

    Originally Posted by Sansei
    Increasing population gives increasing demands.
    That also working/abt to work population means much more demand than a greying and old population ( span of life). Huge migrant population adds to this demand.

    Knowledge based eco
    KPO's, BPO's and allied industries in bio/med/IT are different than saturated tech companies with huge research budgets but miniscule employment potential. gives lesser demand due to lesser popultn involved

    Peoples expectation
    People r used to scarce developable land availability (low infra), ignorance of rules(insider trading ),Rampant black money transactions, unregulated markets, lack of alternatives. etc. They r now getting good houses and roads etc, but at exhorbitant prices thats another story. Migration / equalisation due IT/reservations etc. adds to the demand.

    Population density
    The India mass is huge and ballooning. Its like comparing Indian GDP/armed forces with American. We will fit in some of their states /commands ,though the situation is improving. Except for density no other points can be comparable.

    Black Money
    The RE is the best way/ channel to convert balck monies. Agreed American /Jappo have more monies (times ), but look at the absolute numbers of people involved. more people more demand.


    So different class:

    Methinks: RE crash might not be possible in this basic amenities /aspiration / infra denied society like ours.
    At best expect stagnation / some fall but no crash.



    Sansei,

    Your arguments are valid. But they may be a little long on emotion and a little short on the unemotional way this world works.

    I believe that the only reason why prices continue to be so unreasonably and unsustainably high is the relative ignorance of the buyer about financial issues as well as the over-riding pressures from society to buy RE!

    The developed and predominantly Western world does not have this problem.

    Indians especially get married to our investments unlike most other people in the world. So we are far more susceptible to taking a hit when values go down and are also far more willing to hold on till they come up.

    But ultimately remember, Japan in 1980s also had a young population and (if your memory goes back to that period) there was far more propoganda about the "Japanese" style of management that made them world-class in almost anything than India ever had!

    The only thing that is probably saving this country is the relative under-dependence on exports we still have. Remember, both Japan as well as China and for that matter the Asian Tigers ALL had big hits when the s**t hit the fan simply because they were too dependent on exports nd had no domestic demand to talk about. This may eventually save us.

    cheers
    CommentQuote
  • Originally Posted by contra
    Japan is a good case study for anyone who is interested to research on this Real Estate bubble and busts.

    Japan, inspite of such large population density in habitable areas, had such a long crash in land prices.....so this entire theory like " there is only so much land in this world, Buy land, they're not making it anymore" was tossed out of window. If a person had purchased land in Tokyo in 1991 or even 1995......they would have by 2007 lost 70-80% of value (it likes paying Rs.10,000/sq.ft in 1991 or Rs.7,800/sq.ft in 1995......only to see it drop to Rs.3000/sq.ft in 2007). Japan by the way was not even a poor country...it is as explained before a rich country and a technologically superior nation.

    I did a lot of research about Japan real estate in last 1-2 months which opened my insights i must say. What struck me the most was ....there was no major unemployment problem in Japan (expect for some smaller auto makers and suppliers) during this period 1990-2007.

    Japanese exporters like Toyota, Nissan, Honda, , Panasonic, Canon etc continued to be world's best brands and leaders in every market they went. Japan had a trade surplus with any country name it. Japan had the largest current account surplus (only in recent years China overtook pushing Japan to 2nd place) among any country in the world. So it had jobs for its youth, it had one of world's biggest trade and export income, it had current account surplus which was highest in the world...so money was put in people's hands......yet real estate crashed...what happened.

    It is these insights, where inspite of no major unemployment problem...yet real estate crashed in Japan which is very interesting. If land prices rise beyond all fundamentals to unsustainable levels...then they will correct even if there is no employment problem or goverment revenue problem.

    If Japan with all its trade surpluses, current acccount surpluses, huge export income was not able to prevent a land price crash....than how can India with current account deficits, much lower export trade income, high dependency on domestic market which is still small be different and prevent a real estate bust. Are we shooting bullets in air.



    Thank you Contra. This is perhaps the best argument I have seen so far in this forum . This should serve as an eye opener to people who believe in RE bull theory. People like Nats ofcourse know the truth but spreading bull theories with vested interest. Where are you Nat, gone hiding. Come on face the reality. Thank you again! I don't think anybody can refute this. If this was the case US then I wouldn't have agreed but this is Japan, more crowded than India and several ways similar to India. Let us see whether any bull is coming out in open.
    CommentQuote
  • Originally Posted by nabishek
    Interesting information on Japan RE bubble from Wiseman and Contra.

    As per chaos theory, when same experiments are repeated under similar environment with no random elements involved and everything seems to be perfectly in order, The outcome can be totally different due to slight variation in the initial conditions.

    What were the initial conditions that setup the RE boom in Japan, was it the same excess liquidity?Could you please also share which event triggered the crash?was it a event like subprime mortgage crisis?

    Also, how did the Price crash affect different locations in Japan?

    To be specific the boom in India saw price rise in Tier I cities first, later Tier II and then followed by Tier III cities etc.

    So,Now that all Tier I cities have seen 30-40% correction, shouldnt the Tier II cities like Chennai, Pune etc follow suit immediately?

    When the Bubble bursts, does it retract the same path that it inflated and show correction in phases or like a typical bubble burst bring down the prices to the initial levels sharply?

    Thanks in advance for your replies.




    I found the answers myself by doing a little search on the net.

      There is a striking similarity between the Japan RE bubble and ours.
      What we are experiencing now is surely a asset/credit bubble which is bound to go bust someday.
      The bust more or less brings back the prices to the initial levels in all locations where price was inflated due to excess liquidity/credit.
      During the RE cycle, There has been multiple false top and false bottom calls misleading people.
      The upmove is normally sharp, whereas the downmove is normally slow and excruciating.
      I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.
    CommentQuote
  • Abishek. At last ...

    Originally Posted by nabishek
    I found the answers myself by doing a little search on the net.

      There is a striking similarity between the Japan RE bubble and ours.
      What we are experiencing now is surely a asset/credit bubble which is bound to go bust someday.
      The bust more or less brings back the prices to the initial levels in all locations where price was inflated due to excess liquidity/credit.
      During the RE cycle, There has been multiple false top and false bottom calls misleading people.
      The upmove is normally sharp, whereas the downmove is normally slow and excruciating.

      I support what contra has said, Land prices coming down is the best thing that can happen to our economy.The best feasible proven way to address the asset/credit bubble has been liquidification of assets, which is possible only at saner prices.

      I firmly believe buying RE is not only investment.The returns you get from RE investment should be treated like a additional incentive.RE is generally passed as is for many generations and is not sold quickly as they are tied with sentiments and emotions.In many cases, Fruits of RE investment is relished and enjoyed only by our descendants.

      The primary value and attractiveness of RE still remains "Basic need" and "sense of holding/ownership" and with the way our indian society works, people who can afford will still buy RE and worthy properties will be still sold even if the market is in tumbles.

      Only those who see RE as a investment and means to own everything before their retirement even if its by taking huge loans are in great risk.With the bubble going bust, they will end up holding assets priced half the worth of the mortgage amount they would have to pay back.

      One thing that is still unclear is a definitive method to identify a top or bottom.

      Atleast means to identify a false top call or false bottom call would suffice.

      One tip, that I found in one of the articles I read was

      When Euphoria about RE investment is still present, its a false top call.

      When Income levels cannot sustain the current price, its a false bottom call.


      Abishek,

      Permit me to blow my trumpet here a little.

      First, you have a very good information organisational skill. Neatly put.

      If you notice, the basis of my arguments about where prices may come down to is the logic put forth in your post as well as past track record - we only have the 1995-2004 decline to fall back upon.

      In fact, the 95-98 decline phase saw prices go as far as 80% of the previous peak. Secondly, the 95 prices were achieved again only in 2004 (that too without adjusting for inflation). If you adjusted for inflation 95 prices would have come back only by 2006-07.

      This means the mini RE bubble we saw in 95 took over 10 years to end - that too because of the global credit bubble tha allowed prices to run away again!!! This one should take longer since this time the global economy is in synchronised contraction and the effects will be much more severe and long lasting!!!

      Second, we come to the issue of timing the bottom. Once again there are numerous posts where I have postulated about false bottoms, including calling current prices as anothe false bottom. 2 reasons for this.

      1. Global economic scenario still very weak and bearish. Till that resolves, we will be in a depressed market (volumes as well as prices)

      2. Unless every last vestige of bullishness is removed from the market, bottom will not be formed. Going by the number of people still wanting to jump in at the earliest opportunity, I see there being more opportunity for prices to come down. This is also supported by prices being way too high to be sustainable - except for people who talk about 21% CAGR from these levels over next 2 decades (you know where that argument is going).

      Calling Tops and Bottoms

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers

      In the stock market we know from past experience that tops are formed when P/E of sen reaches around 24 to 28 times current earnings. And bottoms are formed when P/E reaches 12-15 times. This time too at 21000 the P/E was over 26 and we knew the time was near.

      In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

      Please note that simply because price bottom is near, it does not mean that market will run away upward immediately. It takes as long as 8-10 years after price bottom for price to come back to previous top again and it does so excruciating slowly.

      Thanks everybody for permitting me to blow my own trumpet a little!!! :D

      cheers
    CommentQuote
  • Originally Posted by nabishek
    One thing that is still unclear is a definitive method to identify a top or bottom.

    Atleast means to identify a false top call or false bottom call would suffice.

    One tip, that I found in one of the articles I read was

    When Euphoria about RE investment is still present, its a false top call.

    When Income levels cannot sustain the current price, its a false bottom call.


    I didnt get the last 2 lines. Please explain further. I am assuming as though you are alluding that we are in false bottom call in Chennai/correct?
    Very good post. useful inputs. Thanks again for your efforts.
    CommentQuote
  • Originally Posted by wiseman
    Abishek,

    In the RE market, I presume the best indicator is based on the rental yield on the property (which is akin to the P/E for stocks). So, as someone said, 200 times monthly rent (which is approx. 5% rent yield per annum) seems to be the long term equilibrium price of RE. So, when yield goes down to 2.5-3% (like recently) the top is probably in and when it yield goes to over 6-7%, then bottom is probably near.

    cheers


    Wiseman. Thanks. Others might have also thought so, but i remember mentioning 200 times rent as the fair value of properties.
    I dont have problem with this thumb rule theory which is very general.
    But as far as chennai is concerned, from 2007, for the past 2.5 years , i know that this theory is not holding good. i am wondering as to why should it not hold good for so long, which means is the rule of thumb overwritten? OR

    in your opinion, what will be the last straw in the back,that will get it to lower levels. by when? Thanks.
    CommentQuote
  • Originally Posted by Vinod Gupte
    PS. I have some old stock papers, would Wisey like to eat it. They have become almost worthless! LOL!
    you are scaring your readers including yours truly. does that mean we should take your advice with a pinch of salt? ok, i am kidding.

    Well, in the 1980s and 90s many companies were floated in India which never saw the light of the day. Some were doing fine and disappeared suddenly. It is not as if Enron or Lehmann are exceptional. Many such examples have existed in India and if you remember there was a bank in Maharastra that collapsed in 1999 or 2000! Well for the recently educated kids, many old stories look like new stuff! Cant help it!
    CommentQuote
  • Originally Posted by contra
    Some RE broker wrote " the land in india is limited...some 17% of world population in 3% of land." This argument is a typical sales pitch of any RE broker.

    When you talk to such brokers, just ask them if they have heard of 2 countries in the far east of india known as Japan and South Korea.

    Japan is size of karnataka, but is 8th most populated country in the world. Even though when measured in terms of population/land ratio Japan and India have same density....unlike india 2/3rds of Japan is filled with mountains, lakes, volcanos ( including the beautiful picturisque mt. fujiyama) and earthquakes are common. Which means already for a land scarce country....only 1/3rd of land in habitable.

    Japan is also not a kickass country...it has one of the highest per capita incomes in the world...the most advanced nation in the planet with technological superiority above all nations (except its neighbour south korea..i will also write about south korea).

    So just by taking any RE broker's argument Japan's real estate particularly in habitable locations like Tokyo, and other cities should have been a buy,buy,buy.

    Unfortunately, the world is not your's only to behave as you expect. In japan real estate has crashed since 1990...now even after 19years ....prices in tokyo business district are still 80% down from 1990 peak and bottom is not yet over. Japanese people always dreamt of the bottoming in 19 years but it never came and only prices crashed furthur and furthur.

    South korea is even smaller than Japan. Even if entire 100% land in south korea was habitable still its population density is double of india. Population density of Seoul greater metropoliton area would be 3-4 times chennai greater metropoliton area.

    South korea is considered the second most advanced nation in the planet...though I think they are now equal to Japan, to share the tag of world's most technologically superior nation. In korea they used 8 megapixel cell s in 2005...only now in 2009 rest of world is seeing this 8 megapixel cell s. South koreans laugh at google...they consider google as very primitive search engine. In south korea the most widely used search engine is Naver...which has 95% market share. South korea had social networks in 2000....rest of world started using myspace and facebook only in 2006. Korea has highest internet penetration with 99% active users on world's second fastest broadband internet connections after Japan.

    South korea has one of highest per capita incomes.

    So this country has (1) technologically most advanced nation status (2) highest salaries and incomes per capita (3)Population density higher than India and Chennai.

    Yet in south korea real estate bubble burst in 1989...and came down 80% by 1996...in 1997 asian financial crises furthur damaged the situation.

    Even korea and Japan with (1) more population per acre land than india (2) incomes much higher than India (3) technological superiority over rest of world..... were not spared. When their RE bubbles burst, land prices just crashed 80% in subsequent years.

    Look at the Chameleon which said that it wont write again here suddenly reappearing and calling me a RE broker. The fact is the guy has no brains, will switch sides from bull to bear and then may be tommorow to bull without any logic. Shameful act though! He challenged Nabhishek for logic and will challenge anyone stating that is what Contrarian is! God bless us.
    On the other hand, in Japan the RE went up to the sky between 1980-90. They were developing sometime then into a financial superpower.
    India is just doing the same now. In other words between 2003 and 2014 even if our big countries growth is restricted by the same timing as Japan, it will be RE up up and up only. Unfortunately contra will take what suits him. So if RE went up and fell, he will miss the upmove conveniently and talk about the downmove.
    All said and done, Contra's view are for fun. Not for any logic.
    Do chameleons have a logic. They change colours to avoid predators? So why does contra change colours?
    CommentQuote
  • I like these folks talking about Japan and missing the Japanese curve. Good they will think it will fall and it will move up. After a few more years these same folks will tell it wont fall. That is when the top comes. Not now. Ofcourse you are all allowed to assume that market will fall! Pity that after one full year of Wiseman crying that market should fall, it just is not falling. I am really sorry for Wiseman! Wiseman is now trying to get this site to sound like a Stock site than a RE site since in anycase his prediction on RE have just failed as ever and on stocks he can always tell something and then defend it by saying it only failed 17% or something.
    "Even after falling, mud did not stick to my moustache" - Wiseman will tell this always.
    CommentQuote
  • Originally Posted by anandxx
    can some one present if u have info how much does
    land cost in JAPAN (per sq ft).
    before 1991 and in 2009 in a centralised place similar to chennai
    or mumbai.



    ]http://www.stat.go.jp/english/data/nenkan/1431-17.htm

    Found some interesting spreadsheets on this Japanese government website.

    In Osaka, residential land prices after rising 8-10 times between 1985-1990, started correcting after 1990. Each year it corrected by around 10%. Slowly and steadily falling at rate of around 10% every year.

    In 2007 finally prices were exactly where they were in 1986.


    Does the story sound familiar:D

    Found some interesting spreadsheets on this Japanese government website.

    In Osaka, residential land prices after rising 8-10 times between 1985-1990, started correcting after 1990. Each year it corrected by around 10%. Slowly and steadily falling at rate of around 10% every year.

    In 2007 finally prices were exactly where they were in 1986.


    Does the story sound familiar:D
    CommentQuote
  • Shout all you like. You still have not sold!

    Originally Posted by Natarajg007
    I like these folks talking about Japan and missing the Japanese curve. Good they will think it will fall and it will move up. After a few more years these same folks will tell it wont fall. That is when the top comes. Not now. Ofcourse you are all allowed to assume that market will fall! Pity that after one full year of Wiseman crying that market should fall, it just is not falling. I am really sorry for Wiseman! Wiseman is now trying to get this site to sound like a Stock site than a RE site since in anycase his prediction on RE have just failed as ever and on stocks he can always tell something and then defend it by saying it only failed 17% or something.
    "Even after falling, mud did not stick to my moustache" - Wiseman will tell this always.



    Nats,

    You said recently that you found my posts too complicated. My advice to you was to keep it simple and skip reading them because you may not have the capability to understand. After all, your entire acumen seems to be to buy at current price and hold it to eternity. That anybody can do! The othe rpart of your acumen is to take the greatest boom in the Indian market over the last 20 years and apply the same growth rate to the next 20 years. The world has been cyclic but never linear. But maybe these are complicated concepts for you.

    You only now realise that the 9000 level has been reached on the Dow. The last rally around 10 june saw the Dow go up to just below 9000 from where it reached 8100 in a steep fall. Around that time I went long anticipating this rally and am curently long in the market from 4200 Nifty.

    Thats not the point. Point is, this is a classic bull trap. You will notice that with every 100 point increase in indices, a lot more people will jump in and pump in their money. When the maximum (dumb) money gets into the market, sentiment will coincidentally change and the bears will take down all the bulls with another steep decline (remember the towel squeezing analogy). This will happen till all th bulls are squeezed out of the market.

    This is also exactly what seems to be happening in the RE market where Builders come in when sentiment is temporarily high and trap buyers with higher prices, only to see prices go down when the next dip in sentiment comes up. This will go on for some time.

    The more the Dow gets pumped up on Administration Talk, the bigger will be the trap. Please remember that this jump in Home Sales is still significantly lower than last year. And Microsoft has just come in after trading hours with dismal sales news and is 8% down.

    Taking small pieces of data to suit your needs is very simplstic and probably suits your requirement of trying to talk up the RE market. Keep on dreaming! :D

    cheers
    CommentQuote
  • The pity Wiseman is your posts are not coherent. So it is not a problem of my acumen, but a problem with your inability to speak coherently!
    As for Dow, or any market. They move up and down. Did I say one should buy and hold to eternity? Not necessarily. Even in stocks you mentioned you bought at 4200 Nifty, but just a few days back you were expecting 3800. This again is a classical case of you lying!
    You always write stories after the event and you sell stories of past events.
    For me the clarity is simple. Trade in stock markets. Even here the trend is bullish as of now. As for RE, one should be a super bull and the prices are likely to escalate atleast for the next few years, read 5years atleast. Whether I hold or not has nothing to do with this, since as I said one invests in RE as a safe bet against inflation and removes money when one needs it! If you dont understand what I said being incoherent in your reading ability as well, let me make it simple.
    Buy RE now and you will profit for sure in the next 5 to 10 years much more than any other generic mode like stocks or gold and for that matter being a bear in RE is utter stupidity as of now. Cheers.
    CommentQuote