Housing Price Index since 2010

[grindingla]

It is observed that the index of house price, had been growing at an annual average rate of about 20 percent (y-o-y) in 2011-12 and 2012-13. However, the pace of growth in the average house prices slowed in 2013-14 at 12.7 percent, plausibly reflecting a correction in trends on the back of subdued demand. For the latest Q4 of 2013-14 quarter, the y-o-y increase in the House Price Index at the all-India level was 11.4 percent compared to 10.5 percent in the preceding quarter.

Quarterly data comparison of Tier 1 Cities I have used the data available on RBI's website to see the performance of tier 1 cities with the base as the 2010 year.

It is evident that buying a house was a great investment back in 2008 or even beyond but considering the last 10 year data even though the prices are increasing but the growth rate has substantially decreased. This should be a good start to consider before buying an extra house in a form of investment.

ALL INDIA HPI: This shows the decrease in YOY with 2010 as the base year.

Open for thoughts

 

[logant2222]

@grindingla RE also goes through cycles just like any other asset class. Use it with allocation and you may be fine.

Most people, include I, don't recommend it because it's filled with risk, illiquidity, lack of transparency, high ticket size without commensurate benefits. Plus, most people (here) have anyway some RE because of owning house or inheriting one.

 

[grindingla]

@logant2222 Moreover I don't have enough cash to buy a property for investment purpose and most people buy it by taking home loans even if they own a house, they would rent it and call it investment. So I don't feel taking that liability to my head for next 20 years.

 

[ronit]

@grindingla Where is this data from, if you don't mind telling?

 

[grindingla]

@ronit https://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics

 

[ronit]

@grindingla Thank you.

 

[longhardroad]

@grindingla The housing market is pretty dangerous to invest into because of three reasons imo;

1. It takes a massive amount of capital of debt to get into. Also with prices very high, there's very less opportunity to hedge unless you have a few crores lying around or can afford to take on the debt.
2. This leads to problem of risks being tied to one entity with unforseen outcome. If it's a new property - the builder may run out of cash and project might get stalled for various reasons like environmental concerns, other types of litigation. For older properties, depreciation is difficult to ascertain as a lot depend on the quality of the property. Also there are other challenges like ownership. A piece of land you bought today could get encroached tomorrow by local goons backed by political parties and you can't do a thing about it. The litigations might go on long after you're dead.
3. It takes time to do any transaction, you can't just bail when you want to. Finding a buyer and negotiating a deal takes time. Same goes for the seller.

Overall, the housing market is growing and there's no denying it. But it's expensive to get into and hedging is very difficult. Transactions are slow and uncertainty is pretty high given a lot of factors beyond your control. It's not a regulated market and not designed for quick rebalancing. For me, this is an area I'll invest into when I'm actually ready to own a property to settle down, with no concern if that property is going to appreciate or not. I'll treat it as an acquisition where I'll live and the amenities that come with it. Prices going up is just a cherry on the top.

 

[bradskii]

@longhardroad Also older flats compete with newly constructed houses which is rather tough.