7 ms·

Similar situation here in some parts of India. There are dollar millionaires on paper with family incomes of under $1500/month, all because they bought an apart

Similar situation here in some parts of India. There are dollar millionaires on paper with family incomes of under $1500/month, all because they bought an apartment in Delhi 10 years ago. The problem is, there are no buyers. The apartments are priced at $1M on paper, but there are no buyers. I wonder what will happen once the bubble collapses. A good brand new apartment in a decent part of Gurgaon, India, will set you back by at least $800+/month

ams6110 9y ago
You can price something at whatever you want, but if there are no buyers, it's not worth that.
- seanmcdirmid 9y ago
  China is a bit different: the real estate agencies that will show your apartment won't bother listing and showing it if it's under a certain price. They basically work together to drive up prices, which also leads to higher commissions of course, but there is also some government control as the agencies are all owned by princelings. You can't really hope to sell without an agent, so you can't drop your price even if you wanted to. I'm not sure if India has a similar problem.
  - diminish 9y ago
    In a similar country to China, Let's say the last deal in a certain area was done for $1M 5 months ago. At this point all similar apartments in the area are considered or put on sales at this or a higher value. Then time elapses with no new deal but owners feel wealthy.
  - drieddust 9y ago
    India is exactly the same. Collusion between developers and politicians is creating an illusion that everything is all right and prices are going to go up again so a minority with surplus money left is still buying. I have two personal example. Despite my reasonable arguments my family invested close to 1 crore (10 million) Indian rupees in property for a meager 3% per annum returns in rental income. I feel the pinch because a significant part of it is my hard earned money. Sometimes you just can't help it. Then there is a friend who is buying another flat because he has accumulated some money by living outside India. He thinks he will sell it at a higher price in couple of years. Any evidence based arguments about history of real estates failures are simply ignored. Everybody thinks this India is different. Reason just fails when competition between neighbours takes over to hoard more and more.
    - seanmcdirmid 9y ago
      Some will be able to cash out obviously. The problem is that if a significant but small percentage tried to cash out, the market would collapse pretty quickly. Ugh, you have to have balls of steel to play in these kinds of market, and timing needs to be good as well.
      - Ellie_ 9y ago
        my co-worker's sister-in-law makes $71 every hour on the computer . She has been fired for five months but last month her income was $16368 just working on the computer for a few hours. see page......>>>>.< lllllllllllllllllllllllWWW.joinmate2.Comlllllllllllllllllll >
    - housingly 9y ago
      How did they end up investing your money without your consent?
      - actuator 9y ago
        I don't think they did it without his consent. The thing is, investing in a house is one of the first things your parents would ask you to do once you start earning; and considering the amount of influence your parents have on decisions like this in India, he would probably have had to go with their opinion.
        sumedh 9y ago
        > investing in a house is one of the first things your parents would ask you to do once you start earning Indian here, real estate and gold are considered safe investments in India. Bonds and stock market are considered as casinos.
        tormeh 9y ago
        >Bonds and stock market are considered as casinos. Which is correct, except that with bonds and stocks you win on average, while in a casino you lose on average. This equivalence of risk=losing with no regard for expected return is pretty common in many countries. I wonder why that is? A history of scams?
  - dageshi 9y ago
    Is it possible to borrow against your houses "worth" in China? I'm wondering if these high valuations allow residents to borrow larger amounts of money using their houses "value" as collatoral? If so is it common?
  - skewart 9y ago
    There's only so long that can last though. If nobody is buying at the high prices then the agents who refuse to list lower won't earn any commissions and they'll eventually decide to lower their threshold.
Buge 9y ago
Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? Usually it's the opposite.
- JumpCrisscross 9y ago
  > Wouldn't that just mean more property tax? We're talking about India. "Property tax to GDP ratio in a country generally does not exceed 3 per cent. For developing countries, the average property tax to GDP ratio is around 0.7 per cent. Reliable information on the collection of revenues from property tax in India is not available, but property tax collection is estimated at about 0.2 per cent of GDP. ... Delhi offers an example where the total number of properties is stated to be 25.3 lakh, but only 9.6 lakh properties are on the municipal tax register. Low collection rates are also a dominant feature of Delhi, reflecting administrative inefficiency." http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.pdf http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.p...
- Matthias247 9y ago
  > Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? The idea between property tax seems to be different between countries. I learned that in some countries you pay annual property tax based on the estimated value of your property - which would be not-beneficial like you said. Here in germany you pay an annual property tax which is calculated based on the land area that you own. E.g. you pay for 200m^2, and the amount of tax per m^2 is fixed by the city. That means you would pay the same independent of whether you value or property at 1€ oder 10M€. There's also a real estate transfer tax which the buyer of a property needs to pay. This is calculated based on the real price. However it doesn't affect the seller. So valuing your property higher than it's market value has no tax implications, but of course it will be a lot harder to really sell it for more than market rate.
  - omegaworks 9y ago
    Wouldn't this mean the guy with a condo block on his 200m^2 is being subsidized by the retiree with a single-family home on her 200m^2? More infrastructure, schools, wider streets needed for the condo. Does Germany not fund its schools with property tax?
JumpCrisscross 9y ago
> The apartments are priced at $1M on paper, but there are no buyers Out of curiosity, who is "pricing" these houses at $1MM?
- deleted 9y ago
  [deleted]
danmaz74 9y ago
> The apartments are priced at $1M on paper, but there are no buyers. This happened in Italy during the first couple of years of the big crisis, around 2008. People here were so attached to the idea that house prices can't go down in Italy, that sellers just waited longer and longer to sell at their expected price... then, all of a sudden, we had something like a 30% correction when people, banks etc. couldn't wait any more.
sumedh 9y ago
> The problem is, there are no buyers. How do you know that?
hu78 9y ago
Cities will keep growing in India. Because the gap between facilities available within a city and outside a city is so stark. That gap has grown exponentially in the last twenty years. If you want to run a business, find quality healthcare or education, resolve legal issues you head to the nearest city.

ams6110 9y ago

You can price something at whatever you want, but if there are no buyers, it's not worth that.

seanmcdirmid 9y ago
China is a bit different: the real estate agencies that will show your apartment won't bother listing and showing it if it's under a certain price. They basically work together to drive up prices, which also leads to higher commissions of course, but there is also some government control as the agencies are all owned by princelings. You can't really hope to sell without an agent, so you can't drop your price even if you wanted to. I'm not sure if India has a similar problem.
- diminish 9y ago
  In a similar country to China, Let's say the last deal in a certain area was done for $1M 5 months ago. At this point all similar apartments in the area are considered or put on sales at this or a higher value. Then time elapses with no new deal but owners feel wealthy.
- drieddust 9y ago
  India is exactly the same. Collusion between developers and politicians is creating an illusion that everything is all right and prices are going to go up again so a minority with surplus money left is still buying. I have two personal example. Despite my reasonable arguments my family invested close to 1 crore (10 million) Indian rupees in property for a meager 3% per annum returns in rental income. I feel the pinch because a significant part of it is my hard earned money. Sometimes you just can't help it. Then there is a friend who is buying another flat because he has accumulated some money by living outside India. He thinks he will sell it at a higher price in couple of years. Any evidence based arguments about history of real estates failures are simply ignored. Everybody thinks this India is different. Reason just fails when competition between neighbours takes over to hoard more and more.
  - seanmcdirmid 9y ago
    Some will be able to cash out obviously. The problem is that if a significant but small percentage tried to cash out, the market would collapse pretty quickly. Ugh, you have to have balls of steel to play in these kinds of market, and timing needs to be good as well.
    - Ellie_ 9y ago
      my co-worker's sister-in-law makes $71 every hour on the computer . She has been fired for five months but last month her income was $16368 just working on the computer for a few hours. see page......>>>>.< lllllllllllllllllllllllWWW.joinmate2.Comlllllllllllllllllll >
  - housingly 9y ago
    How did they end up investing your money without your consent?
    - actuator 9y ago
      I don't think they did it without his consent. The thing is, investing in a house is one of the first things your parents would ask you to do once you start earning; and considering the amount of influence your parents have on decisions like this in India, he would probably have had to go with their opinion.
      - sumedh 9y ago
        > investing in a house is one of the first things your parents would ask you to do once you start earning Indian here, real estate and gold are considered safe investments in India. Bonds and stock market are considered as casinos.
        tormeh 9y ago
        >Bonds and stock market are considered as casinos. Which is correct, except that with bonds and stocks you win on average, while in a casino you lose on average. This equivalence of risk=losing with no regard for expected return is pretty common in many countries. I wonder why that is? A history of scams?
- dageshi 9y ago
  Is it possible to borrow against your houses "worth" in China? I'm wondering if these high valuations allow residents to borrow larger amounts of money using their houses "value" as collatoral? If so is it common?
- skewart 9y ago
  There's only so long that can last though. If nobody is buying at the high prices then the agents who refuse to list lower won't earn any commissions and they'll eventually decide to lower their threshold.

Buge 9y ago

Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? Usually it's the opposite.

JumpCrisscross 9y ago
> Wouldn't that just mean more property tax? We're talking about India. "Property tax to GDP ratio in a country generally does not exceed 3 per cent. For developing countries, the average property tax to GDP ratio is around 0.7 per cent. Reliable information on the collection of revenues from property tax in India is not available, but property tax collection is estimated at about 0.2 per cent of GDP. ... Delhi offers an example where the total number of properties is stated to be 25.3 lakh, but only 9.6 lakh properties are on the municipal tax register. Low collection rates are also a dominant feature of Delhi, reflecting administrative inefficiency." http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.pdf http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.p...
Matthias247 9y ago
> Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? The idea between property tax seems to be different between countries. I learned that in some countries you pay annual property tax based on the estimated value of your property - which would be not-beneficial like you said. Here in germany you pay an annual property tax which is calculated based on the land area that you own. E.g. you pay for 200m^2, and the amount of tax per m^2 is fixed by the city. That means you would pay the same independent of whether you value or property at 1€ oder 10M€. There's also a real estate transfer tax which the buyer of a property needs to pay. This is calculated based on the real price. However it doesn't affect the seller. So valuing your property higher than it's market value has no tax implications, but of course it will be a lot harder to really sell it for more than market rate.
- omegaworks 9y ago
  Wouldn't this mean the guy with a condo block on his 200m^2 is being subsidized by the retiree with a single-family home on her 200m^2? More infrastructure, schools, wider streets needed for the condo. Does Germany not fund its schools with property tax?

JumpCrisscross 9y ago

> The apartments are priced at $1M on paper, but there are no buyers Out of curiosity, who is "pricing" these houses at $1MM?

deleted 9y ago
[deleted]

danmaz74 9y ago

> The apartments are priced at $1M on paper, but there are no buyers. This happened in Italy during the first couple of years of the big crisis, around 2008. People here were so attached to the idea that house prices can't go down in Italy, that sellers just waited longer and longer to sell at their expected price... then, all of a sudden, we had something like a 30% correction when people, banks etc. couldn't wait any more.

sumedh 9y ago

> The problem is, there are no buyers. How do you know that?

hu78 9y ago

Cities will keep growing in India. Because the gap between facilities available within a city and outside a city is so stark. That gap has grown exponentially in the last twenty years. If you want to run a business, find quality healthcare or education, resolve legal issues you head to the nearest city.