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Will Real estate collapse all over the world? Will your home hold value in the future?
In every part of the world, Real estate has sky rocketed. The appreciation in process is really spectacular in China, India and to some extent in America. But what about future, anything that goes up comes down – are we sitting on Global real estate ticking time bomb?
Any investment can collapse only one two circumstances – first the prices were speculated to high level based on invalid assumptions and second the fundamentals of the underlying value to the investment deteriorated. What about your and y home – is it going to collapse in price?
There is no doubt debt driven speculative bubble is the root cause for Real Estate to sky rocket in many parts of the world including China, America and India. The fundamental economy in all these three countries is strong and robust. Then the only thing we have to worry is the extent of the speculative bubble and something that can puncture the speculative bubble.
While bubble can go on becoming bigger forever, Government laws, decrees, approaches and preferences cause the bubble to burst.
China may have taken the first step to puncture the speculative bubble in China. China plans to impose new taxes and restrictions on real estate transactions in order to curb speculation; Xinhua news agency reported May 12. Homebuyers who sell within two years or leave land idle for more than a year will face extra taxes, while land-use rights for sites kept idle for more than two years will be revoked. Additionally, buyers of unfinished or undeveloped properties will be banned from reselling before construction is completed. This will make Real Estate in China collapse – at least on the short term. The better approach for China would have been a soft landing scenario facilitated by the Government.
In America, the huge ballooning budget deficit and need for funding the social security will definitely impact the tax saving on mortgage interest on homes. If that happens, the bubble will burst.
In India, the bubble can burst due to new Government taxes stemming from skyrocketing crude oil and natural gas prices.
So no matter where you live watch for speculative bubble in Real Estate and any clues to Government puncturing that bubble by increasing massive tax. Till that happens, the investment on your home will be safe.
Disclaimer: Trade at your own risk. We are not responsible for any loss. This is just an opinion. Trading in futures or stocks in the market is risky.
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