Property bubble - Whats my thought?

A property bubble? Not yet, says UN report
http://www.deccanherald.com/deccanherald/apr212006/realty19732006420.asp
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Provides a wonderful insight into a certain perspective generally held
by a segment of analysts. Interesting thing is that this is a global
phenomenon with local variations of price fluctuations.

There are a lot of doom day scenarios about real estate crash which
has been constantly being played out by pessimists since 2000, that
never came . Now, the reality and understanding is setting in - It
will slow down and not crash..

Specifically, in India at the hot areas of Bangalore, Gurgoan, Pune ,
Hyderbad, etc.. Prices have really gone up, because of people being
able to afford to buy whether its the local professionals or the
NRI/Gulf investors.

But, what I don't see is "speculation" - which means people buying
property which they cannot afford and later defaulting ( a mass
default is what could lead to crash). People are making profits by
selling, but people buying are the ones who have cash or the ones who
can afford a bank loan. Speculation is happening in Miami, San
Diego, Dubai etc

The optimists are banking on that the prices will continuously go up.
There is no such free ride. What goes up must come down, but this is
a global scenario being played out. If we look at the money poured
into Bangalore Real estate from US, Europe, Hongkong, Singapore,
Local in crores.. its amazing.

Its been 7 years, since then prices have doubled and now slowing down
due to high Interest rates. Its getting beyond affordability. In my
view, the reason why its sustained is because there is Income coming
into the individuals , and the main thing is the market has expanded
and will not crash is because of a lot of middle class potential
buyers in Asia now with incomes topping the top 5% of salaried folks.

So, the strategy for investors is to use the age old formula. Buy low
and sell high after a long time ;-) Identify low cost affordable
properties in new areas/towns and keep it for a long time. Because
history has always shown that points between more than a decade has
produced growth .

The million-dollar questions for the investors is to figure out :
- what slope of the graph are they getting on?
- can they survive in case of a hard landing?
- if there is patience for the long marathon?
- can they sleep well even if its rock bottom?

Its good and wise to be prudent. But its important to note, unless we
are in the game, we will not know if we have lost or won - and
another 7 years will pass away..

Some history, I can relate to in USA is based on job growth, salary
increase, benefits etc.
1. From 1992 to 1994 - it was recession with very bad time for jobs, money etc.
2. From 2000 to 2003 - it was recession with very bad time for jobs, money etc.

This was for different reasons . But due to globalization a lot of
theories are to be redefined and a lot of economists are still
grappling with the question of how things will shape up.. My
suspecion is the 10 year cycle of downturn will come again and this
time will hit INDIA around 2011 to 2013 . may be badly or mildly ..
who knows - All I know is - I got to write the exam to either fail or
pass ;-)

> 2 cents


PS: Since India is following a little of US in its housing financing..
a good old read from harvard " Why the Housing is Strong?"

http://hbswk.hbs.edu/item.jhtml?id=3420&t=finance&noseek=one
http://www.jchs.harvard.edu/publications/finance/W02-5_Colton.pdf
http://hbswk.hbs.edu/item.jhtml?id=4342&t=finance