Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

Affordability of houses in Mumbai down 50% in 3 yrs: study

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Affordability of houses in Mumbai down 50% in 3 yrs: study

    Affordability of houses in Mumbai down 50% in 3 yrs: study

    New Delhi, February 26: Rising real estate prices and increased interest rates, coupled with demand-supply mismatch, has brought down the affordability of residential property in Mumbai by over 50 per cent in the last three years, a recent study shows.

    The report "Housing 'un'affordability in Mumbai" by rating agency Crisil said the city has seen nearly four-fold jump in residential real estate prices in certain areas over the last four years, while growth in income of an average household has been in the range of 15-25 per cent annually. "The residential real estate price increases in Mumbai have been of the order of 50 per cent and 300 per cent over the last three years, varying area-wise. Housing finance rates have increased by more than 300 basis points over the same period. Even after adjusting for the increase in urban salaries, affordability has lowered by half over the last three years," the report said.

    It added that most of the supply is targeted towards higher-income household, rendering it largely unaffordable for 56 per cent people living in the city with an annual household income below Rs 2 lakh. "Though most households in this category aspire to buy a house, residential real estate for this category is largely unavailable. Only three per cent of total households have annual incomes above Rs 20 lakh, which is the target segment for premium properties," Crisil said.

    The report said residential property priced between Rs 40-80 lakh is witnessing a dip in demand and believes that if the existing supply is not absorbed by March, prices would see a correction of 5-15 per cent in select areas as the additional supply gets announced.

    http://www.mumbaipropertyexchange.co...s.asp?news=742
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    So do you guys believe this is a first sign of a crisis or crash? Could it be just a regular step on the way up...

    Comment


    • #3
      Just look at these developments

      Guys, just look at these developments in the Indian economy on Wikipedia, where would a crash come from?

      Comment


      • #4
        I wonder what the latest terrorist attacks have done to the local property market? As if the global economy wasn't enough - the market must have cooled somewhat more aye.

        Cheers,

        Donna
        SEARCH PropertyTalk, About PropertyTalk

        BusinessBlogs - the best business articles are found here

        Comment


        • #5
          hi
          the market is varying occasionally due to the investor demand and the developer's supply of the developed property.the market crash when the investor did not evaluate the market and the property before buying the property its good for the investor and also for the market to evaluate and consult with real estate consultants for best option for next step.

          Comment


          • #6
            The good old affordable housing myth again :-)
            From my blog this morning....

            “THE MYTH OF AFFORDABLE HOUSING!”
            This comment developed a life of its own and became a lot larger and more involved than I intended. I apologise for that but I hope you find it interesting.
            It is cruel to use the hopes and dreams of people against them. More so when it involves their aspirations and plans for their future wellbeing. For generations Kiwis have believed in their right and ability to own their own home, originally a home on a quarter acre section becoming something a little more humble of recent date. Soon it will be a dream little less ordinary for the majority.
            I have noted various comments about the un-affordability of homes, attacking the increasing multiple of the average household income that houses now cost, as if it could somehow be altered and things could go back to the way they were. It simply won’t happen for many reasons. Other comments along the lines of housing must fall to meet rental returns are equally short sighted an unlikely and misleading.
            1. Consider the following:-
            • The median section cost in 1992 was $71,000 and reached a high median of $480,000 range (there were months where distortions took the median price as high as $750,000 but I choose to ignore those months).
            • Section prices went up a staggering 676% at their peak.
            • Today with median section value at $322,000 that represents an increase of 453% since 1992.
            • Houses by comparison rose some 330% ($160,000 to $528,000).
            • What that means is that somewhere between $250,000 and $400,000 of the increased cost of homes is due to land increases (only $118,000 or thereabouts, is due to increased cost of materials and labour).
            • Even if the use of medians distorts the exact position, the picture represents what is happening is accurate.
            • In 1992 the introduction of GST caused median household incomes to drop to $32,800
            • Household income (before tax) has doubled, houses (after tax) more than trebled.



            How does this situation come about? The new biggies in the mix are taxes and levies.
            • The median sale price of a home (new) is $528,000 of which $58,700 is GST.
            • To develop a section you will pay the council somewhere between $0-90,000 in levy fees ,contributions and environmental compliance costs.
            • Holding costs accrued from delays due to the inefficient resource management act add significantly to the increase.
            • The monthly cost on a $100,000 mortgage to pay all these taxes is $640 and will use the first $10, 900 of the average household income of $67,800.
            • It is an outrage committed by stealth upon the public generally.


            The major cause for the rise is the subtle change in the way councils have sought to fund infrastructure. In the past infrastructure costs associated with growth had typically been funded by the government through public service debt. The debt servicing was through community wide taxes (rates).
            The current approach has been to abuse the user pays philosophy and tax the new homes via levies to fund the infrastructure.
            In Sydney Australia a new home will incur infrastructure charges of $68,000 compared to an actual cost estimate of $1750 – the difference of some $66,000 is used to cover a range of infrastructure that benefits the broader community including libraries, new roading, public pools and transport. These levies may or may not be spent in the neighbourhood that was taxed. I.e.: new home buyers are subsidising the replacement and upkeep costs of infrastructure that they may not even benefit from. This is effectively happening here today in NZ.
            The councils also continue to levy the community at large (rates) and seem to be able to avoid being held to account. I see no likelihood that this situation will reverse.
            A further contributor to the cost increase of land is relative scarcity. In one of the worlds least densely populated lands we have a scarcity of sections – not a shortage of suitable land. Increasingly development of land has been restricted by various forms of government, essentially to reduce their contingent infrastructure costs.
            Major components in the increased costs are as a result of land rationing, excessive amenity requirements, excessively expensive infrastructure fees and approval processes and a general increase in inflation – Are these factors reversible? I doubt it!
            2. We have heard calls for the removal of negative gearing taxation benefits for rental properties as an aid to increasing affordability. The same calls were heard in Australia and in 2006 Earnest & Young prepared a comprehensive report submitted to the Henry-Warburton enquiry in 2006. The report identified the following…
            • The majority of Australians taking advantage of negative gearing was in the $40-80,000 pa. tax bracket.
            • Negative gearing encouraged private investment in rental housing, without which rental yields would be prohibitively low and cause investors to quit the market.
            • Negative gearing helped place a lid on rental pressure by increasing the stock of rental housing and taking pressure off rents.
            • Removal of negative gearing as occurred under the Hawke-Keating government in the 1990’s would immediately lead to an exodus of investment in rental housing causing rental shortage and rapid rise in rents (the Hawke-Keating government rapidly reversed their decision).
            • Removal of negative gearing in today’s climate, especially given greater land shortages and higher development costs would have a dramatic impact on the rental housing market.
            • I am confident the above would be broadly similar and apply in New Zealand.



            I conclude from the above that the taxation benefits of rental property ownership will remain and that we will not again see home ownership levels in the 80-90% range. Currently hovering around 63-64% in Auckland.
            Home ownership will become the province of those with above average wealth, or those with parents who can help. Dependency on rental housing will increase and future generations of Kiwi’s will not be able to aspire to own a home of their own and will suffer from rising rental costs.
            I have yet to see Tax/Levy reductions and have no belief that they will come about. Conversely, there is no lack of example of increases – often indirectly. The local and national governments will not relax land supply and neither will the cost of raw land or development cost of that land fall.
            There will never be a better time to buy property than today and it was always so. It makes no difference whether you are buying investments for your future needs or homes for the kids or even just to move, this is a great time to do it and you can move with confidence. If you think it is difficult today, I am sure it will be more so tomorrow.
            Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
            To get the latest investing information on time and for free make sure you get my regular newsletter here

            Comment

            Working...
            X