market
A fear of bubble comes in the mind of everyone who is looking to buy or invest in real estate now a day. But without looking at facts one should not come up with any conclusion that speculates real estate bubble in India.
Indian real estate industry is growing with a CAGR of more than 30% on the back of robust economic performance of the country. After a little downturn in 2008-09, it has revived rapidly and shown tremendous growth. The market value of under construction project has increased from bn at end-2006 to 2 bn by end-June 2010, which is equal to 8.2 per cent of India’s nominal GDP for 2009.
Besides the Govt. initiatives- liberalisation of foreign direct investment norms in real estate in 2005, introduction of the SEZ Act, and allowing private equity funds into real estate, key factors contributed to this tremendous growth were ‘lower price’ which has attracted buyers and investors not only from India but NRIs & Foreign funds have also deployed money in to Indian real estate market. In addition to that, aggressively launching of new projects by builders had further improved this positive sentiment which paved the way for rapid growth in market last year.
Now question is whether any Bubble is forming in Indian real estate market? Let’s look at the recent real estate bubble in USA, Europe and middle-east. Beside economic factors, key contributing factors in those bubbles were rapid rise in price beyond affordability, home ownership mania, belief that real estate is good investment and feel good factor among which rapid price hike is a key cause of any real estate bubble.
Comparing it with Indian scenario, all those factors are working in major cities of India specifically Tier-I cities. Prices has skyrocketed and crossed earlier pick of 2007 in the cities like Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune. Even in some cities like Mumbai, Delhi, Gurgoan and Noida prices have gone by 25-30% higher than the pick of the real estate market in 2007. However during economic downturn in 2008-09, prices fell by 20-25% in these cities. Other factor is home ownership mania and belief that real estate is good investment. Need based buyers and investors were attracted by lower prices in the end of 2009 and started pouring money in real estate market. Tier-I cities Mumbai, Delhi-NCR, Bangaluru, Chennai, Pune, Hyderabad, Kolkata has shown maximum investment in real estate projects. Developers have taken the advantage of this improved sentiment and started launching new projects. This has further boosted confidence among those buyers and investors who had missed opportunity to buy or invest earlier which has further increased price unrealistically fast. And at last feel good factor which is also working since last few months. The key factor of any bubble market, whether we are talking about the stock market or the real estate market is known as ‘feel good factor’, where everyone feels good. For the last one year the Indian real estate market has risen dramatically and if you bought any property, you more than likely made money. This positive return for so many investors fueled the market higher as more people saw this and decided to invest in real estate before they ‘missed out’. This feel good factor is at the heart of any bubble and it has happened numerous times in the past including during the stock market crash of 2008, the Japanese real estate bubble of the 1980′s, and even Irish property market in 2000. The feel good factor had completely taken over the property market until recently and this can be a key contributing factor for bubble in Indian property market. Even after flow of negative news on real estate market correction and/or bubble, people are still highly positive on real estate growth in India.
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Looking at above factors, there is possibility of bubble formation in few cities in India but it can harm buyers and investors only if it bursts. Generally bubble form with artificial internal pressure and can stay for long time if not acted by external force. Similarly, in case of real estate market, bubble can burst if demand and price start falling suddenly and drastically. Few findings of recent research by IKON Marketing Consultants throw more light on this. According to that majority of investors from Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune are now not willing to invest at this level of price as not seen any rise recently. Majority of them are about to exit and book profit on their earlier investment. Other factor is demand supply gap. In city like Mumbai were around 6500 apartment with 45 million square feet space is under construction but majority of developers are worried on lack of 100% booking. Same situation is with Delhi and other major towns of India which has demonstrated higher than expected enthusiasm. Though developers giving positive outlook of market while interviewing them but their confidence level is very low which is giving negative signals of falling demand in nearest future. Third important factor is expected outflow of foreign fund. India, as an attractive investment destination a huge fund has been deployed in Indian property market by foreign institutes and NRIs. But now property market in US, Middle east and Europe has been stabilized and started growing gradually which is attracting foreign funds due to lower prices. A huge fund is expected to withdraw from India as foreign investors see greater opportunities in those countries. All these factors may act as external pressure which may lead to bubble burst.
Considering above facts, IKON Marketing Consultants predict that there is a possibilities of real estate bubble in Tier-I cities like Delhi, Mumbai, Bangaluru, Chennai, Kolkata, Hyderabad, Gurgoan, Chandigarh & Pune. However, IKON does not see much trouble in overall market as Tier-II and Tier-III cities are growing gradually and are the backbone of Indian real estate industry. According to IKON’s research, Indian real estate industry may see some down turn in 2011. It may start from 1st quarter of 2011 and last up to 3rd quarter of 2012. However it will be not too intense as it was during recession period. It is expected that price may slash by 10-15% during this phase of correction but under certain situation it may last up to end of 2013 with price correction of 30% specifically in Tier-I cities.
By its nature, a bubble is a short term phenomenon while Indian property market has shown continuous growth, apart from periodic adjustments, in the last few years. One should not forget that there are more than 400 million Indians waiting to hit the middle class group which will require more than 75 lacs housing units by 2013. Whether bubble burst or see a bit trouble in short term, growth story will remain intact for Indian real estate industry. However affordability is the most important factor when it comes to housing prices and middle class housing is much levels of affordability in most of the major cities in India. People, who compare India with developed European cities, forget the huge difference in affordability in both areas. Of course there is a huge demand for housing but they can only buy what they can afford.
Azaz Motiwala is a marketing consultant and CMD of IKON Marketing Consultants India, a leading marketing consultancy company assisting corporate and SMEs with expert advices and solutions on various areas of strategic marketing.IKON serves wide variety of Industry including Construction and Real Estate for real estate marketing in India
Category : Real Estate Market
Austin has long been a home for friendly folk- friendly to each other, friendly to animals, and friendly to the environment. What used to be considered as only the concerns of hippies and the bohemian sect, environmentalism is now at the forefront of commercial and residential design, and “green” businesses are popping up nationwide. Austin, however, was the first city in the United States to establish a local green-building program, laying out environmentally friendly and sustainable guidelines for home builders and its interested citizens back in 1991.
Since the Austin real estate market is known nationwide as the leader of these green building methods, the National Association of Home Builders chose the city as its hub to launch an industry-wide effort to establish green-building guidelines in 2004. These guidelines now provide a practical nationally recognized framework for builders to follow to reduce a home’s environmental impact by making them more energy efficient, improving indoor environmental quality, and so on. Though Austin has already been using similar guidelines for over a decade, now the rest of the country is following suit.
The City of Austin and Austin Energy provide a great resource to owners of Austin homes, and new home builders, who are looking for ways to conserve energy, and build an environmentally friendly home. The city’s website offers a list of companies willing to do an energy analysis of a home that will determine possible options to help the house conserve more energy, with suggestions ranging from air conditioning repair to weather stripping doors. The city then will offer a 20 to 75% of that cost.
For those Austinites building a new house or commercial building, the city created the Austin Energy Green Building organization to promote the construction of high quality, more sustainable buildings, and has even zoned sections of the city’s real estate to require an Austin Energy Green Building rating. Four times a year, the organization also holds a one day “Green By Design” workshop open to the public. The workshop provides an overview of the green building process, and brings in design, building, engineering, landscaping, and Austin real estate professionals with many years of experience in homebuilding and remodeling, to help make sense of it all.
In March of this year, Austin was named as the city leading the country in “cleantech” by SustainLane, an online resource center that offers sustainability tips to state and local government. The term “cleantech” refers to venture capital-based startups based in green technology, with Austin as the front runner with seven such startups, ranging from internet-controlled irrigation to geothermal energy technologies. To keep Austin on the cutting edge of green technology, the Clean Energy Incubator program was set up to help young clean energy businesses succeed by commercializing their ideas. With citizens, government, and forward thinking businesses, Austin will likely be the city to follow in the environmental battle for years to come.
Ki is a real estate agent in Austin and can help buyers find a green friendly home in the Austin real estate market. If you are looking for more information on the Austin market his Austin real estate blog is a good place to start your research or you can search for homes on his Austin MLS search.
Category : Real Estate Market
Austin Real Estate tumbled and touched the bottom-most point like any other real estate market of the United States. Property price was going down, and in the last two years this continuous drop in price caused many Austin realtors to panic. Many Austin homes were up for sale, but no buyers were looking at it, and home owners lost their hope. Hence, “Austin Homes for sale” placard was gathering dust, as no one cared about it anymore.
Then came February, and it brought the good news. Congress approved American Recovery and Reinvestment Act of 2009 sanctioned ,000 tax credit to the first-time home buyers. Thanks to this legislation, the buying sentiment returned to the market.
Since then, the Austin real estate market has recovered a great deal. And the news that Austin will be among two cities to recover earliest from recession is adding up to the positive market sentiment in Austin.
Real estate studies
According to a new nation forecast by IHS Global Insight, Austin and its Texan cousin San Antonio will be the two cities that will be quickest in beating the economic recession.
According to the study conducted by the Brookings Institute, Austin is among the Top 20 best performing metropolitan area in the second quarter of 2009, as said the report published in Austin Business Journal.
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In the second quarter, Austin has also been found leading the pack on many of the 9 metrics tracked by MetroMonitor for100 U.S. cities. These metrics included things like metropolitan products, and percentage change in housing price, etc.
There are many reports that coming that shares the same sentiment, which compelled me that I should find some data to match the prediction. Hence, I am going to provide here some hard data as evidence to corroborate with these and several other studies.
Austin Real Estate marketing data The Austin home sale in July 2009 has torched the mark set in July 2008, as reported by Austin Board of REALTORS. In July ’09, 2,069 homes were sold, where as in July ’08, 2,068 homes were sold. The median home price was also just 2% at 1,500 below the median home price in the same month last year. This data might not have looked positive in the bullish market, but given the state of Austin real estate in this year, this can be seen as a good recuperation. 8,810,549 was the total value of single-family properties sold in July 2009. In August 09, total house sold: 1706; average listing: 5,966; median listing: 5,750; average sold: 6,372; median sold: 0,000. In September 09, total house sold: 1639, 0.61% rise since September 08 (1629); average listing: 7,361, 0.69% rise since September 08 (5,585); median listing: 4,900, 2.63% rise since September 08 (9,900); average sold: 6,185, 0.04% rise since September 08 (6,079); median sold: 8,500, 1.89% raise since September 08 (5,000). Most of the U.S. cities are still struggling, but 17% of total homes that had “Austin Home for Sale” placard have found the buyers. To put it plainly, Austin has seen a 17% decline in home inventory, and witnessed increase in sale. The Brookings Institute’s study found out that the Austin house price is up by 2.4% over the past year while the US house price is down by 6.3% over the same period. Conclusion
As it is evident from the data given above that the predictions and forecasting made by national as well as Austin realtors are proving to be true. The Austin real estate market is heating up as the market sentiment is back into the buying mode. The confidence in the home owners are back, and now, no “Austin Home for Sale” placard is gathering dust.
Andrew Welkinson reviews Austin Real Estate and Austin Homes for sale services providers. To learn more about Austin Realtors visit Austin Homes For Sale.
Category : Real Estate Market
Property Market Conditions Continue to Change.
While there are few markets in the country that have managed to survive the current housing market without any battle scars there are some markets that have experienced more serious issues than others. Two of the worst markets in the United States at the moment are Cleveland and Detroit; however, they are definitely not alone when it comes to markets that are falling with no end in sight any time soon.
By and large, the riskiest markets at the moment are those that are experiencing the highest rates of foreclosures. Other factors that are contributing to problem areas include high rates of job loss and slow job growth. Markets in which the number of homes for sale is rapidly rising are also experiencing significant problems. Rapidly rising property values just a few short years ago is also proving to be a stumbling block for many markets.
During the housing boom these markets commonly experienced property value increases of two-fold and even three-fold in many cases. Once the boom ended; however, these markets began to fall and as of yet, they have not hit the bottom. These markets are also at greater risk for problems due to the large presence of adjustable rate mortgages.
During the housing boom, as prices were escalating quickly, buyers frequently took advantage of adjustable rate mortgages to obtain even lower interest rates to make their housing payments more affordable. This was quite common in areas where first-time home buyers were struggling to afford the rapidly rising prices of homes.
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The sub prime mortgage market is also more highly concentrated in these areas of the country. Lower interest rates at the time prompted many people to rush out and buy homes. Unfortunately, the credit profile of many of these buyers was less than sterling. Mortgage loans made in these markets during this time frequently involved sub prime, adjustable rate mortgages. As the market began to fall, interest rates began to increase. Today, those same homeowners are finding they can no longer afford their mortgage payments. The result? Foreclosures have risen sharply in market areas where the boom once allowed housing values to double and even triple practically overnight.
Economic conditions in many areas have further fueled the crisis. As the number of layoffs increase, the number of foreclosures and homes for sale seem to increase as well.
At the moment, the ten worst housing markets in the country are Sacramento, New Orleans, Detroit, Riverside-San Bernardino, Las Vegas, Tampa, Miami, Cleveland, Phoenix and Jacksonville, Florida.
Sacramento, considered to be among the top ten of the worst housing markets, has experienced a drop in homes prices that is well above the national average. Like many other housing markets in similar situations, Sacramento fell victim to a fast paced market and subsequent plummeting pricing. Today the median home price for homes in Sacramento remains far above other markets in the country, despite the worsening situation. Given the large number of houses on the market; however, this is far from good news.
In spite of the situation in Sacramento; however, it is definitely not the worst case scenario at the moment. That honor goes to Detroit, where market prices have experienced a drop of more than 7%. The key factor in Detroit is the massive amounts of layoffs stemming from the auto industry. Matters are not much better in Cleveland where median prices have also dropped by several percent and inventory continues to rise.
While these markets are not showing any signs they will rebound in the near future; there are some markets; however, which are actually posting increases. Seattle is one such market. Median home prices in Seattle have actually risen almost 9% in the last year. Other cities on the rise include Raleigh and Charlotte in North Carolina as well as San Jose, California. San Francisco is not far behind, garnering an increase of more than 7% in the last year.
To find out more about the real estate market in the USA visit Real Estate City
The Real Estate City Directory provide a comprehensive Realtor and Real Estate Business Listing Service.
http://www.realestatecity.org/
Category : Mortgage
August 17, 2011
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Category : Agents & Brokers &Blog &Mortgage
