Housing Bubble in South Africa thoughts and ideas

[Dave A]

Kevin, to me it's clear cyppok ain't no fool.
And there's value in getting an outsider's view and to challenge one's thinking.

At the end of the day, it's also a chance to fix misconceptions - both the overseas view of us and our own view of ourselves.

You and I know that you don't need shots to visit most of South Africa, but some of our nothern border wilderness areas and certainly once you head north of the border (still in Southern Africa, remember) you most certainly do. And even then you could still get whacked with sleeping sickness, malaria, bilharzia, tick bite fever (and there's probably more) that could have you stuffed for four months (or longer).

Or maybe cyppok's buddy was just shagged from having such a good time

We also know our crime rate isn't good, but it's not the worst either, and again, it depends where you go.

So let's not be defensive, my friend.

[cyppok]

Bah comp rebooted and I don't feel like writing it all over again.

Kevin those are my perceptions and I am sticking by them after watching documentaries on youtube. They may be wrong but they are mine.
Education and indoctrination are great they teach you to behave like sheep and nod when the government tells you red is green and vice versa. I like thinking for myself, I may be wrong but I have nobody to blame but myself.

Dave... yes Ireland is cheaper than SA at the moment cause it is slowly going down to affordability while SA is still up there and in real terms higher.

Wynn its not just loans and people its also builders and construction companies, real estate creep due to higher values and other aspects. In Ukraine there is a bubble and prices are deflating and all you could have taken out was 1/3rd the value bank thought you prop was worth which was always below. (lots of reason for this but I won't go into it)
Those large inventories and the ability to keep builders in solvency makes banks/them partners to keep inventory off of market. This prevents market clearance and doesn't eliminate the current burdens of taxes, upkeep, security, weather, etc on the amount of properties they keep in said shadow inventory.
If the average prices is 1.2 mil rand and average wage is 50k say household makes 100-150k rand its way way above their 1/2 possible payout for a mortgage or anything. They might get cheaper properties that are below but overall the market shifts upward in the amount it likes to charge per meter or sf and size of lot or building materials expended. Ergo everyone wants THEIR margins to stay intact with prices being managed by all participants until it starts clearing at which point everyone eats it...

my comp crashed and lots of erased stuff so reposted i guess.

"Its' different here" "We are special" etc doesn't work.. Dubai thought that too.

P.S. they went to Cape Town and then on a safari somewhere my guess they traveled all over. He said food was very cheap and for $10(82.5R or so) bucks you could be served very well. He really liked it but he did get sick for months after.

FYI I was telling my parents that it couldn't go on since 05'-07' market wise was reading lots of bubble blogs who had historical median income to median house price data for the past century + thats where I get my 3times median income thing. Was a very nice graph from 1880s or before doubt I ll find it.

[AndyD]

Kevin, to me it's clear cyppok ain't no fool.

Agreed

Kevin those are my perceptions and I am sticking by them after watching documentaries on youtube. They may be wrong but they are mine.

I spent some time living in NY as well as in SA and I can say I would compare your survival rate as fairly on par as a normal resident. There's many similarities, NY for example you have to take on a block by block basis. One block you're safe as houses in a shopping or theatre area for example, you might walk one block and find yourself in a red light district or surrounded by dingy hotels that charge out rooms by the hour or close to the bus station where people hang on the streets drinking out of brown paper bags. SA is similar, if you're in a normal middle class residential area your easily assafe as you'd by in NY, similarly not too far down the road you might find yourself in an area you might not want to be in.

[cyppok]

Agreed



I spent some time living in NY as well as in SA and I can say I would compare your survival rate as fairly on par as a normal resident. There's many similarities, NY for example you have to take on a block by block basis. One block you're safe as houses in a shopping or theatre area for example, you might walk one block and find yourself in a red light district or surrounded by dingy hotels that charge out rooms by the hour or close to the bus station where people hang on the streets drinking out of brown paper bags. SA is similar, if you're in a normal middle class residential area your easily assafe as you'd by in NY, similarly not too far down the road you might find yourself in an area you might not want to be in.

Yes and no. NY is relatively safe I can even go to a pretty bad neighborhood and walk around a little bit (during daytime before sun goes down). I feel SA is a bit more dangerous though. You are probably right though. Its gotten much safer from the 90s to be honest. Now Detroit or Camden (across from Philadelphia) well those are scary places. Very cheap housing though if you want like 8-9 grand or so in Detroit and probably close to it in Camden maybe a little more expensive (which is odd cause I think its more dangerous).

Also forgot to mention that Ireland had no property taxes up until recently on residential until after it was mandated by bail outs for its investment banks so that euro banks could get "more certainty" in being whole in their bond payments etc... fleecing and whatnot.

___

ON a totally different topic I have an exam tomorrow , I will try to be very optimistic and do my best. Hopefully I get a call back didn't study for it though but who knows I generally did well on exams without studying.
Good luck to me, lol.

[desA]

It has been interesting to follow Mish's blogs over the years. His review of the real estate bubbles has been interesting. He predicted the collapse in Australia & elsewhere, fairly well.

One of his links pegged SA as having the highest bubble globally - well above Hong Kong - leagues above the rest of the planet. I don't remember the precise indices used. Ireland paled in comparison, so I'm not quite sure of the Ireland/SA comparators above, to be honest.

I tend to watch the number of For Sale boards around the patch, versus the Sold signs. Over the past year(ish), the number of For Sale signs has been growing rapidly in many areas I've visited. Indications of the beginning of a real estate bubble collapse?

Practically, the SA economy is heading for a major re-balancing act over the next while. The economy was artificially buoyed by the World Cup of 2010. Once that euphoria wound down, the place has been steadily running towards some level of climax. My personal view is that SA is on the edge of a real estate meltdown, which will hit home as the economy continues its downward slide. SA has little, or no technical expertise left, after years of brain-drain - little to re-attract returning expats.

The reality is that SA is fast approaching Banana Republic status, with an essentially inoperable leadership core. The downward slide is set to increase rapidly unless a major leadership change occurs within the next few years. At that juncture, discussions of real estate bubbles will be essentially academic.

[Dave A]

When it comes to SA's price vs average income, I've got no idea what the concern is. For good measure, I've included a few other suspects for comparison in this one.

[cyppok]

I wonder what income they used for deducing that chart Dave. Interesting kinda I don't believe it simply from global gdp per capita stats but very interesting.

desA yes I read Mish a lot I also like Karl Denninger of Market Ticker.

The reason housing matters is that banks in some degree are seeing the amount of cash flow that passes through them due to housing turnover slowing, mining slowing, and tourism slowing may in the end create a somewhat of a liquidity problem. Payments and velocity of money that they take a piece off matter to them very very much. Hiding unproductive assets takes effort and cash flow from elsewhere to pretend the outflow doesn't exist, the less you have of the former the more induced you are to let go of the later.

Property likes stability of regimes ergo tax and property rights. Both of those are shifting in SA, the headline of property values at ~R5 trillion (5/8.25 = $600 billion) seems to provide impetus for giving the gov't a larger share. The other aspect of property is income yields that is seriously not going to happen in my view. Do they yield anything rental wise? ergo like if you buy a house for 2-3 million rand does it give you a rental yield of 5-6% at least? or no. Even at that yield it would make more sense buying gov't bonds. For commercial property yields this is far more important of-course and many of them provided they are strategic enough and have high enough demand may be good ideas. On the whole though I figure both commercial and residential are pretty weak.

[samanthaflax02]

Seems to be good! Nice and wonderful information.