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Asset Bubble ???

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Asset Bubble ???

Last updated: July 18 2012
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  • Asset Bubble ???

    Property prices across India have gone past their peak levels in 2007-2008. I think we are definitely into asset bubble phase.

    Builders/Promoters are increasing rates by 10-15% every two months. I do not know from where the buying coming from.

    It smacks of a cartel by builders in Pune.

    What is the ground reality? Is there any buying happening at present levels?

    Please share your thoughts.
  • #2

    #2

    Re : Asset Bubble ???

    No bubble..people r getting rich in india

    Comment

    • #3

      #3

      Re : Asset Bubble ???

      Yes, few people are now rich enough to buy a house they like.

      Others are trying to adjust their needs by:
      1. Going for 2BHK instead of 3 & 1BHK instead of 2.
      2. Going for flats having less area (builders know this trick very well).
      3. Searching for projects a little far from city area.
      4. Looking for resale flats instead of new ones.

      So the buying still continues & the rates fail to come down.

      Of course there are few who are waiting for rates to reduce & a right opportunity to buy.

      Comment

      • #4

        #4

        Re : Asset Bubble ???

        nitesh321, very factual comment, reflective of the real situation .
        Please read IREF rules | FAQ's

        Comment

        • #5

          #5

          Re : Asset Bubble ???

          It is Govt funded Bubble. Every Major RE company in NCR has its backing by some Big Politician in power. Many Major Builders in India over leverage and are in huge debt but still they don't wanna learn any lesson (because of blackmoney of politicians)

          RE bubble has already popped at many Places US/Dubai/ and is expected at many places like SPore China and India.

          With the death of Dollar as predicted by Many Major Investors of West in 1-2 years US economy will nosedive like 1930's and it will take few decades to recover. It will definitely have ripple effect in Asia.

          Comment

          • #6

            #6

            Re : Asset Bubble ???

            Originally posted by puser View Post
            No bubble..people r getting rich in india
            Well said! An addition to your statement:

            1. People are getting richer in India

            2. People are able to get loans much more easily in India

            On the other side of the coin, another thing that we also overlook:

            a. People are spending a lot more in India

            -------------------

            Edit: To reword it another way, most people are currently spending future money or tomorrow's income which has also hugely inflated the demand. The supply is reactively trying to keep pace with the demand (phase 2, phase 3 of projects, huge number of new projects, new townships, etc.).

            However, the supply is not noting the fact that because of the huge increase in housing loans, the time is now coming where most people with decently paying white-collared jobs have already spent all their current and future salary until say, 2015. The logic here is that an average person would have taken a loan of 5 times their annual net income, which means that they have borrowed their entire salaries for the next 5 years.

            Sooner or later, when we reach a "tipping point" threshold where most people have already borrowed all their salary for the next 5 years, we will suddenly have a glut or over-supply in the market. On top of this, some of the older purchasers will also suddenly realize that their "new" flat purchased in 2001 is no longer considered new by the market in 2015, and is suddenly starting to look shabby, and that people are actually undervaluing their property because of its age instead of valuing it higher because they had assumed that property price appreciation will continue infinitely. This will sow the seed of a slow panic in the market, when it will start turning into a seller's market.

            Perhaps, the seeds have already been sown. However, this will take time. After all, people will only sell their property at a loss (or a small profit) if they truly start getting convinced that in the future, prices will further go down and they will want to "cut their losses".

            Then, the only thing that will still sustain demand will be a couple of factors:
            a. Growth in the customer base - in other words, the market itself will expand
            b. Growth in salaries of existing customers, although this will also be blunted by inflation and interest cost of existing loans

            In fact, I actually think that government intervention and corruption etc. will line some pockets selectively, yes. But it is not sufficient by itself to "control" or manipulate the market. Ultimately, the demand and supply forces are so strong that at best, the government can do only a little bit to control the market sentiments, emotions, and buy/sell decisions.

            Anyway, this is only a small lay-man theory I have.. i may be completely wrong.
            Last edited December 27 2010, 06:30 PM.

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            • #7

              #7

              Re : Asset Bubble ???

              One more good thread to relook at as some time has gone by.

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