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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Contrarian's case: Why US could dip into recession

    Just as the U.S. economy is strengthening, other countries are threatening to drag it down.

    Employers in the U.S. are creating jobs at the fastest pace since the late 1990s and the economy finally looks ready to expand at a healthy rate. But sluggish growth in France, Italy, Russia, Brazil and China suggests that the old truism, "When the U.S. sneezes, the rest of the world catches a cold," may need to be flipped.

    Maybe the rest of the world will sneeze this time, and the U.S. will get sick.

    That's the view of David A. Levy, who oversees the Levy Forecast, a newsletter analyzing the economy that his family started in 1949 and one with an enviable record. Nearly a decade ago, the now 59-year-old economist warned that U.S. housing was a bubble set to burst, and that the damage would push the country into a recession so severe the Federal Reserve would have no choice but to slash short-term borrowing rates to their lowest levels ever to stimulate the economy. That's exactly what happened. Now, Levy says the United States is likely to fall into a recession next year triggered by downturns in other countries, the first time in modern history.

    "The recession for the rest of the world ... will be worse than the last one," says Levy, whose grandfather called the 1929 stock crash and whose father won praise over decades for anticipating turns in the business cycle, often against conventional wisdom.

    Worrisome signs are already out there. Unlike their U.S. counterparts, European banks are still stuck with too many bad loans from the financial crisis. Business debt there is too high. And confidence is fleeting, as investors saw earlier this month when stocks sold off on worries over the stability of Portugal's largest bank.

    In China and other emerging markets, the old problem of relying on indebted Americans to buy more of their goods each year and not selling enough to their own people means a glut of underused factories.

    Levy predicts a U.S. recession will throw its housing recovery in reverse, and push home prices below the low in the last recession. He says panicked investors are likely to dump stocks and flood into U.S. Treasurys, a haven in troubled times, like never before. The yield on the 10-year Treasury note, which moves opposite to its price, is likely to fall from 2.5 percent to less than 1 percent — an unprecedented low. In 2012, when investors feared a breakup of the euro-currency bloc, the 10-year yield fell to 1.4 percent.

    His forecasts may seem a bit much, but Levy comes from a family with a good record of running against the crowd.

    You don't have to buy Levy's gloomy predictions to see the world may be at a worrisome crossroads.

    Contrarian's case: Why US could dip into recession

    Also, US Fed's Richard Fisher has said that first rate hike 'likely' early 2015, which means lots of money from emerging markets will flow back to US.
    Last edited by realacres; July 26 2014, 11:24 PM.
    If you are happy, you are successful.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Originally posted by Venkytalks View Post
      Real the situation in NCR is terrible. Since everbody is stuck the wheels have stopped turning.

      Oversupply is terrible. Everyone has 3 flats each.

      But my friends wanting to end use are picking up bargains in builder floors.
      +1. I did read news & first hand reports of RE prices down by 35% in NCR compared to 2013. People who bought last or even yearly this year are already sitting on loss.
      There are real news mentioned how a 2+Cr plot last year isn't fetching buyer today even for 1.2Cr.

      And this hoarding by investors is nothing new even in Pune. I have seen an investor who had purchased entire floor in Magarpatta city (Roystonnea I think). Infact, Pune builders have themselves admitted that over 55% of their clients were investors. Now, once a cash cow for builders, today investors are posing threat for builders as they are under-cutting in rates. This is a classic case of friends turned foes.

      Originally posted by Venkytalks View Post
      Actual rental yields would be valued. Rubbish without tenant will be dumped.

      But REIT will need to beat bond returns. Otherwise a few clicks of my button and REIT dumped Bonds bought!

      Tax treatment likely similar i think.

      Agree about waiting.

      Those who think REITS will buy into the landbank theory for capital appreciation will get a rude shock when the regulations come in
      +1. And what I have read is REIT will be considered long term investment to only if held for 3 years. Now this goes for toss as I wonder how many would wait so long. Also, I agree, selling off REIT & buying bonds makes sense when returns are not upto the mark. The best part though is you don't need a buyer, nor a broker to sell REIT like incase of real RE like flat or land. Sell it off at click of a button, invest in RE without actually buying RE. No need to pay any registration, stamp duty etc. I am sure, many RE investors may well turn to REIT as long as returns are good. For the buyers, artificial hoarding will get drastically reduced & due to change in IT act, capital gains tax loophole also has now been fixed, leading to further stress on investors who used to regularly flip properties.

      Btw, Oberoi builders net profit has fallen by 38%, while that of Omaxe has fallen by 37%.
      If you are happy, you are successful.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        while its true that sale has reduced it hasnt really stopped atleast in pune .. while i was searching for a resale recently i saw 7-8 transaction happenning 60L-95L ... it is possible to get good deals ... but dont expect that a 1cr flat will be sold for 60-70L if that should happen i know atleast a dozen who will jump in to buy ....generally rates are plateaued at 5-6k ... while we see quick rise in fringe areas.....

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Venkytalks,
          We have a herd mentality.
          People rush at times to RE when it was hot.
          Earlier I remember people rushing to equity during Harshad Mehta time.
          Previously it was gold.
          probably many have not thought of balanced investments in various asset classes.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Markets' Post-election Enthusiasm Lost on Consumers

            Software engineer Sanjay Bhatnagar used to watch a new Bollywood movie every week with his family, but now goes to the cinema once a month as spiralling costs of food and other staples eat into his budget for non-essentials.

            "It was becoming an expensive indulgence," he says. "Household expenses have risen manifold, but income is virtually stagnant. I had to prioritise."

            While Prime Minister Narendra Modi's election triumph two months ago and his promises of economic revival buoyed business confidence and India's financial markets, Bhatnagar and millions like him remain pessimistic and anxious about the future.

            Two years of near double-digit inflation, stubbornly high because of market inefficiencies and supply bottlenecks rather than strong demand, combined with faltering growth and stagnating wages have squeezed India's consumers.

            Bhatnagar, 36, who works for a medium-sized Indian IT firm, says his monthly expenditure has exploded in the past 12 months because of rising costs of food, fuel and school fees for his eight-year old daughter, but his salary has not changed. "It's been difficult to manage expenses. You have no choice but forgo certain pleasures, certain luxuries."

            Salaries are likely to rise by 10 per cent this year, according to a survey by global human resources consultancy Aon Hewitt, barely beating expected average inflation of 8 per cent.

            Economists warn that without curbing runaway costs, a lasting economic revival promised by Modi could prove elusive.

            Pessimistic Consumers

            Getting consumers to spend more is essential for Asia's third-largest economy to end its longest spell of sub-5 per cent growth in a quarter-century.

            It needs faster growth to create enough jobs for 200 million Indians who will be reaching working age over the next two decades, the largest youth bulge the world has ever seen.

            Real estate firms also feeling the pinch.

            Home sales in big cities nearly halved in the April-June quarter from a year earlier despite developers offering discounts of up to 10 per cent, according to a survey by online property portal

            Markets Post-election Enthusiasm Lost on Consumers - NDTVProfit.com
            If you are happy, you are successful.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              This is another story to create sensation . While I agree that good old days in IT are gone, hikes are in the range of only 6-10%, I seriously doubt anybody cutting down on things like movie etc.
              Having said that, I am not saying RE is doing well. Nor is the overall economy.

              Originally posted by realacres View Post
              Software engineer Sanjay Bhatnagar used to watch a new Bollywood movie every week with his family, but now goes to the cinema once a month as spiralling costs of food and other staples eat into his budget for non-essentials.

              "It was becoming an expensive indulgence," he says. "Household expenses have risen manifold, but income is virtually stagnant. I had to prioritise."

              While Prime Minister Narendra Modi's election triumph two months ago and his promises of economic revival buoyed business confidence and India's financial markets, Bhatnagar and millions like him remain pessimistic and anxious about the future.

              Two years of near double-digit inflation, stubbornly high because of market inefficiencies and supply bottlenecks rather than strong demand, combined with faltering growth and stagnating wages have squeezed India's consumers.

              Bhatnagar, 36, who works for a medium-sized Indian IT firm, says his monthly expenditure has exploded in the past 12 months because of rising costs of food, fuel and school fees for his eight-year old daughter, but his salary has not changed. "It's been difficult to manage expenses. You have no choice but forgo certain pleasures, certain luxuries."

              Salaries are likely to rise by 10 per cent this year, according to a survey by global human resources consultancy Aon Hewitt, barely beating expected average inflation of 8 per cent.

              Economists warn that without curbing runaway costs, a lasting economic revival promised by Modi could prove elusive.

              Pessimistic Consumers

              Getting consumers to spend more is essential for Asia's third-largest economy to end its longest spell of sub-5 per cent growth in a quarter-century.

              It needs faster growth to create enough jobs for 200 million Indians who will be reaching working age over the next two decades, the largest youth bulge the world has ever seen.

              Real estate firms also feeling the pinch.

              Home sales in big cities nearly halved in the April-June quarter from a year earlier despite developers offering discounts of up to 10 per cent, according to a survey by online property portal

              Markets Post-election Enthusiasm Lost on Consumers - NDTVProfit.com

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Even if the economy and job situation improves this year, it is going to take 3-4 years to reach 8 % GDP growth.. only then we can see any increase in positive sentiment about investments in real estate... investments are strictly no in the current situation..

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by kaatesha View Post
                  This is another story to create sensation . While I agree that good old days in IT are gone, hikes are in the range of only 6-10%, I seriously doubt anybody cutting down on things like movie etc.
                  Having said that, I am not saying RE is doing well. Nor is the overall economy.
                  Where have you been for such a long time friend. I recall your name as one of the frequent posters long ago!

                  cheers

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by kaatesha View Post
                    This is another story to create sensation . While I agree that good old days in IT are gone, hikes are in the range of only 6-10%, I seriously doubt anybody cutting down on things like movie etc.
                    Having said that, I am not saying RE is doing well. Nor is the overall economy.
                    Economists in the US have found that its not the small luxuries like movies or vacations which put families in bankruptcy but its the bigger "luxuries" like mortgages on houses people cannot afford.

                    The important distinction between the two is that watching a movie or going on a vacation is a discretionary expense. Its easier to cut back when the weather turns rough.

                    On the other hand, mortgage payments aka EMIs become fixed expenses and its almost impossible to cut back without incurring financial losses.

                    If you lose your job, you may not go for a luxurious vacation but you will still have to pay your EMI. People should have atleast 6-7 months of expenses including rents/mortgages in cash or cash equivalents to ensure that your life remains on track when the weather is rough. I don't think a lot of working class people who own their own houses have that kind of money in the bank. They are more or less living paycheck to paycheck.
                    ...Thoda Aasman

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Also prices can virtually rise everyday, and in some cases like sometime back for onions, prices rose every single day.

                      But salaries on the other hand rise only once a year

                      this will lead to cash flow problems for the average working class indians.
                      ...Thoda Aasman

                      Comment

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