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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  • C'mon. Stating the fact is not spreading negativity. Its a fact in a national newspaper, and its about awareness.
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  • Great. Now that you are aware, please rush to the builder with the same speed you rushed with cheque books while booking a flat, to cancel your booking this time ;)

    OR may be start putting advts for selling your flats asap. (May be magic bricks portal can help)

    RE markets have crashed, bubbles have bursted, OMG the world is coming to an end :D :bab (61):


    Originally Posted by tsongt
    C'mon. Stating the fact is not spreading negativity. Its a fact in a national newspaper, and its about awareness.
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  • Originally Posted by realacres
    MUMBAI: Mumbai's residential property market has shown a negative growth of -9.1% during the year ended March 2012.

    Most of the prospective home buyers in Mumbai are on waiting for an anticipated price correction in the backdrop of oversupply scenario in some of the areas of the city and rising inventory level of nearly 120 million sq ft being under construction.

    'Mumbai home prices down 9.1% in the year ended March '12' - The Economic Times


    Negative growth and price drop are totally different. This is very misleading article headline. The headline says prices down while the article itself says negative growth...no need to sensationalize such misleading articles!
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  • Originally Posted by real_pro
    Negative growth and price drop are totally different. This is very misleading article headline. The headline says prices down while the article itself says negative growth...no need to sensationalize such misleading articles!

    Please don't copy-paste the comments on the article.
    Also see, that after reading this article only, I have clearly mentioned the title about negative growth.
    BTW, several areas in Mumbai are down. Most are in Lower Parel, Panvel & commercial spaces in Colaba & BKC. Even the rentals here have dipped.
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  • Originally Posted by aditi sharma
    --cross post from other thread--

    In other news,
    Home prices crash in Ahmedabad, panic grips builders - Express India

    Thanks for the link.

    Most of the unsold units have piled up in the 300 premium residential projects — units here are priced between Rs 50 lakh and Rs 2 crore — that dot the landscape between the High Court and Prahlad Nagar localities in the more affluent western parts of Ahmedabad.

    The pile-up of unsold units is also bringing about a price correction even in some of the more “affordable” locations in the city where the property market has been on an upswing since 2009.

    Even commercial projects in the city have seen a price correction. Corporate office space in some of the posh locations are being sold at prices that are 20% below the market prices.


    All the above mentioned clearly validates the following :-

    > Even the central areas are not free from risk of price correction,
    > Posh areas taking beating means even those who have money aren't buying,
    > Commercial areas showing 20% dip in prices means businesses are already taking corrective steps. Over a month ago, same thing has happened at Colaba & BKC, Mumbai.
    > Affordable housing taking beating means emphasis even of middle class person is more on securing cash due to economic outlook, not to forget Gujjus are first ones to spot the trend.

    Last but not the least, Gujarat is the hometown of big shot businessmen, many having cash/black money, but despite this the rates in A'bad have fallen by 25% which means BLACK MONEY alone can't stop fall of RE prices as RE bulls claim.
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  • Originally Posted by realacres

    Even commercial projects in the city have seen a price correction.


    Finally you used the correct word, price correction :)
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  • Originally Posted by realacres

    Last but not the least, Gujarat is the hometown of big shot businessmen, many having cash/black money, but despite this the rates in A'bad have fallen by 25% which means BLACK MONEY alone can't stop fall of RE prices as RE bulls claim.


    Nobody is telling that black money alone can sustain RE market, but for that you need to understand others point of view and read their posts carefully. Bulls & bears are part of every market. :)
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  • you sound very similar like some other poster who has been quite for a while

    Originally Posted by mangopeople
    Great. Now that you are aware, please rush to the builder with the same speed you rushed with cheque books while booking a flat, to cancel your booking this time ;)

    OR may be start putting advts for selling your flats asap. (May be magic bricks portal can help)

    RE markets have crashed, bubbles have bursted, OMG the world is coming to an end :D :bab (61):


    you sound very similar like some other poster who has been quite for a while remember veerseva bank .. is that you posting with another handle ?
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  • Originally Posted by mangopeople
    Finally you used the correct word, price correction :)

    Oh, if I knew you agreed to this term, I would have used in my first post with you.

    BTW, price correction is same as price reduction. In TOI, magic-bricks term, it is also called, ' Softening Of Prices'. :D

    * This is just like calling second hand car as pre-owned car, but at the end of the day, whatever you call it, it remains a used car !! Playing with the words doesn't change ground reality.
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  • OK. One example:

    Tomorrow Levis announces 30% discount on Jeans to boost the sales ... I am sure in business sales have a cycle of ups & downs, will you start claiming that Levis is in financial trouble, they are offering discounts, they are not able to make sales ... Levis is in a loss ... company is going bankrupt etc
    blah blah ...

    I always said RE price stabilization and price correction is perfectly normal as in any other investment market. ;)


    Originally Posted by realacres
    Oh, if I knew you agreed to this term, I would have used in my first post with you.

    BTW, price correction is same as price reduction. In TOI, magic-bricks term, it is also called, ' Softening Of Prices'. :D

    * This is just like calling second hand car as pre-owned car, but at the end of the day, whatever you call it, it remains a used car !! Playing with the words doesn't change ground reality.
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  • Is it really necessary for you to make meaningless comments ?

    Do you work in Veerseva whatever bank ;)

    Originally Posted by dougnet
    you sound very similar like some other poster who has been quite for a while remember veerseva bank .. is that you posting with another handle ?
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  • Originally Posted by khbarilal
    The total flow of PE funds into Pune until December 2011 was approximately US$800 million. This consisted of both foreign and domestic monies through around 32 major transactions over the last five years. 2009 saw the lowest flow of private equity funds into the city, though Investors regained confidence in 2010 arrived. The renewed investor confidence resulted in a massive recovery of private equity deal closures in Pune.

    East Pune has the majority of the city's IT industry .......

    Private Equity Likes Real Estate Investing in Pune, India's Other Growth City - WORLD PROPERTY CHANNEL Global News Center

    East is major IT hub compared to West ? This tells us the truth about the advertisement.

    Now let's see the real return.....



    if you actually see the flows of fdi in the graph, in 2011, its almost equal to that of 2008 and much lesser than 2005, 06, 07 and 2010. So maybe next year is again a 2009 kind of situation. Just trying to find a pattern here!
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  • Originally Posted by realacres
    Please don't copy-paste the comments on the article.
    Also see, that after reading this article only, I have clearly mentioned the title about negative growth.
    BTW, several areas in Mumbai are down. Most are in Lower Parel, Panvel & commercial spaces in Colaba & BKC. Even the rentals here have dipped.


    You are copy pasting links that you agree with and I am copy pasting the comments that I agree with...nothing wrong in that!! I don't ever see you copy pasting links where it says Real estate prices will increase...all those articles you consider are written by builders!!

    Anyway...check out Hiranandani, Kalpataru Panvel's price....it is not Down...it is UP! My friend has invested in Kalpataru Panvel and he has made good profit...

    BKC, Colaba commercial per square feet rate are quoted in tens of thousands...lets not even talk about price being up or down there...there is no math or calculation to even calculate the increase or the decrease!! Only random deals at random prices happen there...
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  • Originally Posted by real_pro
    You are copy pasting links that you agree with and I am copy pasting the comments that I agree with...nothing wrong in that!! I don't ever see you copy pasting links where it says Real estate prices will increase...all those articles you consider are written by builders!!

    I copy-paste the news articles as proof; you copy-paste comments which may have no standing. You can't put a simple comment or what man ?


    Anyway...check out Hiranandani, Kalpataru Panvel's price....it is not Down...it is UP! My friend has invested in Kalpataru Panvel and he has made good profit...

    Pls compare the prices man. Also look at the rates of Indiabulls at Panvel.
    And yes, you make profit of 30%, friend makes good profit, but builder makes loss :D.

    BKC, Colaba commercial per square feet rate are quoted in tens of thousands...lets not even talk about price being up or down there...there is no math or calculation to even calculate the increase or the decrease!! Only random deals at random prices happen there...

    Issue is not rate but percentage. And man, what doesn't suit you doesn't mean you run away from it. Face the reality man. Look where corporate offices are now moving. Please visit Mumbai & check for yourself.
    Wake up.
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  • Originally Posted by realacres
    I copy-paste the news articles as proof; you copy-paste comments which may have no standing. You can't put a simple comment or what man ?



    Pls compare the prices man. Also look at the rates of Indiabulls at Panvel.
    And yes, you make profit of 30%, friend makes good profit, but builder makes loss :D.


    Issue is not rate but percentage. And man, what doesn't suit you doesn't mean you run away from it. Face the reality man. Look where corporate offices are now moving. Please visit Mumbai & check for yourself.
    Wake up.

    Realacres...I dont talk anything in the air...I invest...experience and then talk...unlike you who only reads articles and does analysis paralysis...When I am talking about Mumbai...I have the facts not in articles but through experiences...

    You know what the problem with you is...you look at things which are having issues...so you will talk about projects that would have issues...i talked about kalpataru and hiranandani and you start talking about indiabulls...you really have an attitude problem and mislead people!!

    When I talk about math...it includes percentage...there is no point applying percentages for normal investors in places like colaba and nariman point...makes no sense to anyone...let politicians and business tycoons figure it out there..

    I don't need to prove it to you here...if we start getting into facts and figures let me tell you I will prove you are a loser here as well..

    Anyway...I think I have made enough factual points by giving example of Forest county that you are here only for false propaganda...
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