Have Residential Prices fallen?
This is of course a brilliant headline to catch people to come to any website, right?
Well I do not have an answer to this, but hey here are the caveats as usual:
I do not trust Indices in general. After all Indices present the average, and average means NOTHING if you do not know:
How is it calculated
Mean, Median, Mode, Standard Deviation of the data.
If I am commenting with just the mean, my comments could be as inaccurate as P Chidambaram’s estimate of the amount of black money in New Delhi.
Having said that I have only the Residex of NHB to go by and my comments are based on that.
The Residex says that Bengaluru prices of property has gone up by 11% from 2007 to 2014. Hold your breath. If you invested Rs. 100 in a RE it would be worth Rs. 111. In a bank it would have become about Rs. 190.
In Jaipur Rs. 100 would have become Rs. 105. In Hyderabad Rs. 93. In Kochi it would have become Rs. 85.
How many of you believe these numbers? When I walk into a personal finance class I am bombarded with Returns from 18% to 25% in RE. Sir my money doubled in 2 years…Sir….blah blah blah
So it means all my students are a) bluffing or b) they are mathematically challenged. Right?
Now go to the NHB site and see what has really happened. Not in your imagination, or your friend’s imagination. Or in your client’s imagination.
IN real life find out how much is the appreciation. Use excel sheets to see how much returns you got.
Use pattabhiraman’s free calculator. Jago builder ke ghulam. Jago.
http://www.nhb.org.in/Residex/Data&Graphs.php
ak
Wow, I loved the post and comments too, since comments quoted example for blore.
What is inflation in india ? When you quote this number do you give CPI inflation or real inflation or inflation given based on Food/Wholesale price. Or Inflation based on your house hold expenditure increase.
Similarly same applies for housing index. I am amused to see that we choose to ignore Govt back data based on our mindset. Similarly we choose to go with Govt back data again based on our mindset. Typical human mindset.
I am searching for house in blore for past 4 years! If anyone of you are able to point one property which is 11% higher than 2007 rate without any legal issue, in city area, I am ready to pay in immediate 1 hour settlement. Read 1 hour settlement . But do I find one ? Answer is NO.
An human psychology it is very easy to interpret the data the way we want to see. Always remember there are two side of coin and the side which you are seeing need not be always true.
Last and not the least one … First house is never an investment, it is necessity. So whether it appreciate by double or depreciate by half it should not be big deal.
Shankar
@ak: Nice point on first house.First house is never an investment, it is necessity.
First house or living house: Either it is costly silk saree or cheaper cotton saree, saree is necessity, so don’t even think about ROI.
RE as investment ???, well if Subra and Pattu’s calculator cannot make you to see the CAGR for 5..10 years, I won’t even try it :-).
We might be thinking none of the RE has reduced price in the past 10-20 years, well there may not be price correction but time correction is real slow killer of our investment 🙁
Praveen
Subra,
Is it possible to get trending of first time home buyers in india.
My sense is most property purchases are happening by buyers who have already sold their old property.
Praveen