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Comment by seanmcdirmid | Hacker News Reader

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.

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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.

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.

How did they end up investing your money without your consent?

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.

> 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.

>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?

Suggesting any other form of investment is just considered too risky.

There is collusion between banking, real estate developers, agents and politicians in the western world too ...

I actually I think we invented this stuff.

PS: 3% return p.a. for a real estate investment? Amazing; around here real estate investments return zero or below and investors count on property price appreciation, tax deductables or maybe rent increase.

Real estate investment is the new Swiss bank account. It's acceptable to take some losses every year, if it means you get to keep your hoard.

In Indian context, it's below inflation. Cost of management and maintenance is also need to be added so effective it will be between 1 and 2 percent. Not great for developing country where inflation swings anywhere between 5 to 9 percent.

Depositing same money in bank will give more than twice the return.

The property (the house) is "inflation free/resistant":

Money is subject to inflation, because houses (and other goods) rise in price / money is watered down.

So: You may have no gain, but your savings are protected from dropping 5 to 9 percent each year, if "you have it invested in real estate".

Sounds good to me.

Well I may be wrong but you will be true only if I can't sell it at a price significantly higher than inflation.

I do not not see that happening because price correction have already started if you are an individual seller.

For politically connected developers, game is different.

In India inflation is like 4% and growth rate is 7%. I think anything less than 15% p.a. return is not worth the risk at all.

If inflation is >4% then rental income and costs should also grow around that fast.

> Any evidence based arguments about history of real estates failures are simply ignored. Everybody thinks this India is different.

This happened/happens so often, in so many places and markets. Just to mentions a few recent ones: dot-com "new economy", housing bubble in the noughties, cryptocoins right now... it's always, "this time is different".

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?

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.

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.

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