Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • I soo hope that Jethmalani wins the case and the list is made Public and SC forces the government to get the money from Swiss banks back to India..... Pranav Mukherjee (& party) is anyways making fool of India. In past too he was Ambani's personal agent trying to settle issues for him
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  • Originally Posted by am_pune


    Hey Khabari, it will be gud, if you can tell us the builder's name.



    :bab (61): Aloma , Aloma

    One of my close friend who have booked flat there, is pursuing me to book a flat. He told me about the discount, but I asked him to get 25% discount then only I can afford it.



    :bab (61): Aloma , Aloma

    One of my close friend who have booked flat there, is pursuing me to book a flat. He told me about the discount, but I asked him to get 25% discount then only I can afford it.



    :bab (61): Aloma , Aloma

    One of my close friend who have booked flat there, is pursuing me to book a flat. He told me about the discount, but I asked him to get 25% discount then only I can afford it.



    :bab (61): Aloma , Aloma

    One of my close friend who have booked flat there, is pursuing me to book a flat. He told me about the discount, but I asked him to get 25% discount then only I can afford it.
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  • NRIs Returning Back….

    :bab (30):The US, S&P 500 is very close to 1300. The wise money is returning back to US & the offshore boom is cooling down.

    In 2009, Mr. Ravi was very happy with worsening situation in US. With improving economy in US now others will be happy & ……..
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  • Originally Posted by aditi sharma
    They even have info of one ex-PM.
    Twitter

    "Swiss bank account details of a former Prime Minister of India included in the details handed over to WikiLeaks today "


    I would bet my hard earned 10 Rs that it is Devegowda :bab (6):
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  • Originally Posted by wiseman
    Lazy,

    Back in Oct/Nov 2009, when the Stimulus-driven economy was making the markets rise, I was stating that this was the last opportunity for builders to cut prices and move inventory. This was because it was quite obvious that, once stimulus ended worldwide, there would be a worse recession simply because India and other economies could not get their growth story going again without stimulus (largely because of too much debt on their heads) and this debt would HAVE to be reduced for the bull period to start again.

    According to me all along, 2011 would be the start of the next recession/depression and 2012 would likely be the worst part.

    Well, at that time I was accused of being too pessimistic and bearish, etc, etc. But now its starting to return again and this time the builders have nowhere to go as they approach their perfect storm of too much inventory built on too much debt with too high prices and buyers starting to hold back and wait. With banks now unlikely to rollover debt and other sources of funds like IPOs PEs, etc drying up due the the increased risk perception of RE at its high levels of debt and high prices, the sh** will hit the fan very quickly going forward.

    Enjoy and profit.

    cheers


    I feel there is not much to cheer about if people are expecting prices to fall due to another recession. The alternate point to note is that if recession hits again, it will also affect the business and in turn place uncertainties on your jobs. Salary hikes will not be there as well. So on one hand where the prices of flats reduce, so will your risk taking ability. Banks will not give loans so easily. So, Unless one has ample cash available, buying a home will still be a distant dream. This is just my feeling, I am not an economist.
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  • 2003-07 boom repeated but on steroids ...

    Originally Posted by khbarilal
    :bab (30):The US, S&P 500 is very close to 1300. The wise money is returning back to US & the offshore boom is cooling down.

    In 2009, Mr. Ravi was very happy with worsening situation in US. With improving economy in US now others will be happy & ……..



    khb,

    This Western "improving" economy is based on a one-way road to ruin. The 2.5% GDP growth (which amounts to $350 Billion) has been achieved with a minimum additional $2 Trillion of debt loaded on. This means that for every $1 of GDP growth around $6 of debt is being created. Any person or company doing this would have been bankrupted long ago! And we are not including the US Govt secretly emptying the cash money deposited by middle class workers into Social Security which makes case worse. Besides around 70% of this GDP growth is from consumption and not production, which means the money does not add to surplus but is eaten away. Who is to earn back this debt and repay it? Extreme danger in this kind of economic policy.

    At this rate, within a few years the debt load will become unbearable and economy will go into a downward spiral with a huge debt load making it nearly impossible for it to recover under the old currency regime. The only way out is to severely devalue currency and allow bond holders to take a massive loss.

    The Bond market will not allow this to happen by raising rates rapidly to such heights that interest on debt will kill the economy from anothe r direction.

    And the situation in Emerging markets is not much different with high inflation based on massive stimulus in India and China already leading to high interest rates.

    This coupled with stagnating salaries and risks of job losses is creating uncertainlty and doubt in people's minds which makes them postpone large debt-enabled investments.

    Not a very good sign, the direction the world is currently taking.

    But you are very right about the s/w boom cooling. From the very beginning I have been consistently saying that the export sector is rapidly losing its edge. Especially if you consider imposing taxes on this segment (why should a $50 billion industry still get tax sops which was meant to get a tiny export industry off the ground back in the 80s and 90s especially when we desperately needed FX?) there are many domestically focused sectors which ar doing much better. Considering that the developed countries are going to see more contraction it will get worse before it gets better for this sector.

    I repeat that the LEaders of the business are solely responsible for their crass greed and myopia in using the precious decade 2000-2010 in going DOWN the value chain (BPO) to make short-term profits while losing a golden opportunity to go UP the value chain. We will suffer in the coming decade due to this stupidity.

    Lazy, when our older generations used to be cautious in new acquisitions and did it largely in cash, there was a reason for it. Today, after blindly apeing the west in debt-driven binges of buying cars every 2 years and taking on 2 and 3 homes, the old lessons are coming home to roost. Not yet too late to gather cash before going in for buying large assets.

    cheers
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  • Originally Posted by realacres
    morons like Rahul Gandhi should be sent to Spain to his GF...hey his GF was Spanish, don't know current one. Btw, Rahul made a PRIVATE visit to London last week...hmmm:bab (59):.

    Are you sure it is GF and not BF?

    When you are around 40 and still unmarried, such questions are bound to arise in people's mind.

    Wiseman, any real recovery of US economy is bound to be accompanied by inflation and rising rates. I expect it to come after a while, maybe 2013/14. Currently US is well into a phony recovery (India has already gone through the phony recovery and seen a bull run in stocks to boot).

    However, I expect US to weather this turbulent period much better than India.

    Something will have to give way somewhere. My personal bet is on Rupee devaluation viv-a-vis dollar, but I am only 50% confident.
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  • Ain't his gf Venezuelan??

    Originally Posted by realacres
    The Indian Govt has already recieved over 1000 names who have money stashed up abroad. Even Supreme Court has asked the central govt to publish the names, but Congress led UPA isn't. It is the BJP & its MP & senior lawyer Ram Jethmalani who is fighting against these corrupt chaps. This has put Congress on backfoot as not adhering to Supreme Court (SC) will spell more trouble & one can easily guess why Congress-NCP is opposed to releasing the names:bab (34):. Now Congress says don't politicise the issue:bab (45):. Man, speaking for the country means politicizing the issue?? These rotten-heads should be kicked out to Italy & morons like Rahul Gandhi should be sent to Spain to his GF...hey his GF was Spanish, don't know current one. Btw, Rahul made a PRIVATE visit to London last week...hmmm:bab (59):.
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  • Originally Posted by Venkytalks
    Are you sure it is GF and not BF?

    When you are around 40 and still unmarried, such questions are bound to arise in people's mind.



    does this question comes to your mind for even Atal Bihari Vajpayee?

    constructive criticism is not same as irrational loathing.
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  • Originally Posted by Venkytalks
    Wiseman, any real recovery of US economy is bound to be accompanied by inflation and rising rates. I expect it to come after a while, maybe 2013/14. Currently US is well into a phony recovery (India has already gone through the phony recovery and seen a bull run in stocks to boot).

    However, I expect US to weather this turbulent period much better than India.

    Something will have to give way somewhere. My personal bet is on Rupee devaluation viv-a-vis dollar, but I am only 50% confident.

    And on other hand, Japan is going into deflation. Add to it, it's borrowings are a whopping 5 times it's GDP , which is the highest in any developed economy. The jobless nos. have again gone up in US making recovery again distant. The IIPs no. in India have fallen as well.

    But man, whatever maybe the case, my gut feeling says that Indians will have good days ahead in general (here I am not considering stock brokers or builders :D). And to all who are bit worried, let me say that it is only the builders who will be hit the most & not people from other sector as earlier only RE was bailed out while rest swam on their own making others stronger than builders :).

    So, economy in general will be good though inflation will remain a concern & until & unless inflation is brought to its knees, people will be reluctant to spend which may slow down our GDP growth but my over-all outlook in general remains positive atleast for Indian economy.
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  • Originally Posted by realacres
    And on other hand, Japan is going into deflation. Add to it, it's borrowings are a whopping 5 times it's GDP , which is the highest in any developed economy. The jobless nos. have again gone up in US making recovery again distant. The IIPs no. in India have fallen as well.

    But man, whatever maybe the case, my gut feeling says that Indians will have good days ahead in general (here I am not considering stock brokers or builders :D). And to all who are bit worried, let me say that it is only the builders who will be hit the most & not people from other sector as earlier only RE was bailed out while rest swam on their own making others stronger than builders :).

    So, economy in general will be good though inflation will remain a concern & until & unless inflation is brought to its knees, people will be reluctant to spend which may slow down our GDP growth but my over-all outlook in general remains positive atleast for Indian economy.


    I feel high commodity, oil prices with ever widening current a/c deficit does not bode well for Indian economy.

    If foreign-money exits or no new FDI, it will make things worse here.
    In that case INR will depreciate more, causing higher inflation.
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  • Originally Posted by puser
    does this question comes to your mind for even Atal Bihari Vajpayee?

    constructive criticism is not same as irrational loathing.


    It comes into my mind for every single RSS type "unmarried" type - especially those who spend time in Akhadas.

    ABV had a reason for being unmarried - his party expected it of him. Otherwise his proclivities were widely known. I was totally disapproving of this aspect of him - as also his interminable pauses. He did only one good thing - he built roads.

    Rahul's party expects only one thing from Rahul - him producing a waris!!!

    And it has to be a reasonably Indian waris, not half Venezuelan, one fourth Italian and one fourth Indian Kashmiri/Parsi/unknown!!!

    As for Rahul's proclivities, I know nothing about it. Where are our paparazzi when we need them - usually they are to be found barking wildly at nothing. Yet here they keep quiet. Puzzling.

    Please note - I vote BJP for its right wing economic policies and have an irrational loathing for its extremism.

    BTW safron terror is the worst stupidity RSS could indulge in. Idiots.
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  • Originally Posted by puser
    does this question comes to your mind for even Atal Bihari Vajpayee?

    constructive criticism is not same as irrational loathing.


    in Atal's defence he has at least 1 illegitimate child , rite ?
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  • The PM Name is Out

    I have confirmed reports why Congress is not ready to make the names public of whom have stashed billions in Swiss Bank:-

    It is anti-national Rajiv Gandhi who figures in this list . The amount:- US $ 2.3 bn, it means over INR 10,000 Cr!! And this is the amount he stashed in 1980s & 90s. Imagine if one ads Sonia Maino's accounts in Macau, even the 2G scam will look minuscule!!

    And to support this rotten Gandhis?nehrus, the spineless PM, Manmohan Singh says that laws don't allow to make names public. WTF . Can't the names of people who looted this country be made public?? Man, mere reshuffle in cabinet will do no good & frankly speaking if such things continues, naxalism will spread across the country not because people like naxalities but they can no longer tolerate such govt & onions & petrol for INR 65/kg .
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  • One More Property Exhibi

    Man, have the builders gone mad?? Earlier it was Best of East/West etc. Now, this month-end, there is exhibi being held at Wakad-Hinjewadi rd called as Best Of Aundh Annexes. It includes all Pimple *, Baner, Ravet, Balewadi, Akurdi, Wakad, Thergaon, Chinchawad.......!! And I thought all flats must have been SOLD OUT in previous exhibis itself as builders claimed few hundred bookings in couple of days.

    Btw, the tagline reads:- Hurry Before Prices Go Through The Roof!! :D

    * PS:- I have stopped attending property exhibis, found them useless & illusive.
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