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What is Real Estate Bubble?

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Real Estate Bubble

The real estate bubble refers to the considerable falling down of the real estate prices. This is a contradictory behavior of the real estate domain since it always predicted that real estate prices rise over a period of years.

The Indian economy – current scenario

It is necessary to understand the current situation of the Indian economy. Recently, the prices of the share market are rising and the market is good for making investments. The investors can harness the opportunities available in the trading market for earning profits. We can infer that Indian economy is taking maximum efforts to eliminate inflation and maintain stability in the currency of Indian Rupee.

Current Indian economy and real estate domain

The improvement of an economy can be truly judged by observing its real estate prices. Let us understand this procedure in detail. When there is decrease in real estate sales, there is decrease in real estate prices. This leads to the reduction in the property value. The home owners are less interested in purchasing property and do not ask for home loans. This automatically reflects decrease in consumer spending thereby, reduction in GDP. Thus real estate prices help in evaluating the progress of an economy.

Many unexpected issues can be traced in India. For instance, the real estate prices are not going upwards except in cities such as Mumbai. The rates altered by RBI are not helping the people to get more home loans. Thus, in places like Mumbai, the real estate market is facing a downfall.

The real estate bubble situation was found in the year 2008 in the United States when the housing market completely collapsed. Many banks and other financial institutions had to face the crisis and adverse conditions during this period. The Indian economists have predicted a similar real estate bubble and its bursting in India in the coming years. This real estate bubble shares similarity with the US bubble of 2008. Let us first understand the real estate bubble and what is meant by its bursting.

Currently, the bubble situation can be seen. There has been considerable fall in the real estate prices as witnessed in 22 cities by a report. Builders and developers are deliberately not decreasing the prices of real estate property.

What exactly happens in bursting of a real estate bubble?

The developers stop their construction projects during this phase. There is no stability between the demand and supply forces in the real estate market. The interest in investing and buying houses declines amongst the people due to various reasons. The developers continue not to cut real estate prices with the fear of panic situation. At the crucial point of time, they cut the prices of real estate prices and the bubble bursts finally.

It is always advisable to wait for the bursting of the bubble before investing in real estate domain. After the bursting of bubble, the prices of real estate property go down considerably. You will get a wide range of properties for investing purpose and as per your requirements.

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8 COMMENTS

  1. The bubble situation is not really seen in a city like Mumbai. The up-town areas have also seen a steady rise in real estate prices in line with the rest of the city. But overall situation is definitely sombre looking at the halted projects of umpteen builders who are on the run due to financial distress. The big brands are also feeling the heat as seen by the laggard pace with which the construction is happening. The common man is the sufferer in this game. With no light to be seen in the near future, he continues to compromise with current ownership or rented property

  2. Believe it or not the best time to invest is when the real estate bubble bursts. It is during this time that developers reduce the price of their properties. As a result you can get better options for buying a home either for the purpose of staying or investing. So, keep a close eye on the market.

  3. One need to be hawk-eyed when investing in real estate as this sector is always on a roller-coaster ride. This is the period of real estate bubble in India, so one need to keep a watch on this market. The most adopted norm ever for business or some investment is that one wants to invest less and earn more and more. So one should invest in real estate only when this bubble bursts and that is the perfect time when the prices are low and it can be used later profitably.

  4. I’ve experienced this is Sydney – house prices go up and up and up. They stay there for a while, but you always hope they go up again. The question is, do you sell now or sell later?
    Then, suddenly, they go down down down and you just wish you’d sold your house earlier.
    It’s nice to know the facts and figures surrounding real estate bubbles and why they go this way. It really effects you if you are a real estate investor. Pays to keep a knowledge of this when buying and selling houses.

  5. It’s great to hear about the pros and cons of real estate from this article.The real estate thing would ever rise is agreed upon by all.But as explained here the real estate bubble can also burst and lead to serious consequences.Presently too it can be seen that the real estate is not that much profitable.

  6. I had no idea the real estate bubble existed before. Ankita did a great job explaining this bubble and it makes me wonder why construction companies purposefully stop cutting prices. What is their motivation so halt building? Also this article appears to address the new housing market only, not the used houses.

  7. lovely article ! gives well researched facts & opinions !!! Real estate has always been debatable investment.However we have to be quite sure of pros & cons while entering into investment avenue.Real estate has been considered as high risk high reward investment, now that we know that real estate bubble is about to burst.we just have to keep close eye on price changes of property so that we can get maximum benefit at the time of bubble burst.

  8. Real estate bubble effects the economy by decresing the demand and supply. But it is beneficial from the consumer point of view. The developers and bulders do not cut down the price deliberately and keep on charging the same amount. So when do they actually revise the price? After whole payment has been done or part? How can the consumer know about the discrepancy in price?

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