Friday, March 25, 2011

Love and Housing Bubbles

Nelson Rodrigues (a great Brazilian playwright, journalist and novelist) once said: "Love is eternal. If it ends, it wasn't love."

I tend to believe that housing bubbles are in some way like love. One can only be sure that there is a bubble after it burst. [Before the burst, one can always argument that rising prices are reflecting a buoyant market]

Nelson Rodrigues [photo credit: O Globo]

By the way, The Economist Magazine published a very good report on property: Bricks and slaughter. Some interesting snippets:

  • Construction of exceptionally tall buildings is a reliable indicator of economic crises in the making (According to Andrew Lawrence of Barclays Capital)

  • If housing were like any other consumer good, rising prices should eventually dampen demand. But since it is also seen as a financial asset, higher values are a signal to buy. And if housing were simply a financial investment, buyers might be clearer-eyed in their decision-making. [... but] the experience of buying a home is a largely emotional one.

  • Brazil is thought to be short of some 8m homes

  • The whole of India has fewer hotel rooms than Las Vegas

  • According to Barclays Capital, more than 40% of the skyscrapers due for completion in the next six years will be in China, increasing the number of tall buildings in Chinese cities by more than half. [I tend to be skeptical about such numbers...]

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