Global property bubble about to pop? Pop means ‘kaboom’

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Haha. What is ‘kaboom?’  Google for ‘kaboom definition.’ It’s something like an explosion. So, you can also replace it with a simple, ‘Burst.’ Well, I do not think anyone can predict when the next property bubble will burst with full accuracy. However, we should keep track of all the predictions, especially those with some reasons why. Nope, not the usual comment of ‘I think that the property market is about to burst or I think the home prices are already too expensive for everyone.’ Do read this article by The Motley Fool in aol.co.uk It shares a few key points why it says so. Very briefly as below.

China may be the starting point. The article shared that, “Property is still going crazy in China, where prices have been pumped up by yet another bout of government stimulus.”  An example, Guangzhou’s prices grew 36 percent within past 12 months! (reported by KnightFrank)

London is already stalling. The article shared that the property prices in many global cities have slowed. It said, “Prime central London was the world’s raciest property market but is now leading the charge in the other direction, falling 6.4%.” It also shared that some cities have begun to show drops.

Affordability stretched, interest rates bottoming. It shared that cheap money which has been driving prices ever higher for the past 8 years is losing traction. Many regulatory authorities are reining in overheated markets and this includes even China. (It means that borrowing will get harder..)

Leveraging advantages but also limitations in time. Stocks trading can be completed in seconds while property would take months. The article shared that perhaps it’s time to look at stocks instead because property prices at this stage is already extremely high. It shared, “Stocks can be volatile, but wise investors turn that to their advantage by holding for the long term, and taking advantage of any market dips to load up on their favourite shares. That’s a far saner strategy than succumbing to property madness.”

My view? Whether stocks or property, if we bought some overvalued ones (usually hotspots for property or hot blue-chip stocks), we should be ready for some sudden drops. This is usually the case as soon as sentiment turns negative. That herd mentality will always come true because when everyone buys, everyone is confident to buy and when everyone starts selling, it’s going to be a selling frenzy. These days, it’s much easier to know the property prices versus the potential rental. It’s also very easy to compare company A to company B in terms of price to earnings, in terms of company background or even the debt-levels which would normally reveal if the company is able to face a sudden downturn for example. Keep following and reading about all the good and bad news. Then look at what we have in our hands today. Right action helps, usually. Happy investing.

written on 14 May 2017

Next suggested article: Why property prices would fall, my view

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