Marc Faber report from 2003 on 50% house price collapse

[ProdigyofZen]

I think this was a great observation that Faber had in 2003 from one of his reports. This pertains to when housing prices decline to a certain amount even the most prudent individual would let it go and return the house to the bank.

http://www.gloomboomdoom.com/gbdrepo...ad/GBD0305.pdf

In it he states the following;

The reason for the low price level in Thailand, and in most other Asian countries, is quite simple. Thailandexperienced a collapse in its property market after 1997 and the Thai baht lost almost half of its value at thetime. Consider the following. A friend of my wife ran into some money problems prior to the 1997crisis. She took a mortgage loan on her house (also in the centre of Chiangmai, but smaller than ours andnot on the river) worth 10 million baht (at the time, about US$400,000), which she later couldn’t (or didn’t want to) pay back. The bank repossessed the house and sold it a few days ago for 2.5 million baht (because of the devaluation of the currency, now worth around US$60,000)! This case is quite interesting, not only because of the magnitude of the price decline (Tokyo real estate prices have declined every year since 1992 —altogether by around 70% — with the fastest decline in a decade occurring last year), but also because if a property declines by so much in price, even the most tenacious “Liebhaber” homeowner will be tempted to walk away from his property and let the bank repossess it! This is something that real estate lenders should consider when they lend close to, or even more than, 100% of the property value to homeowners and homebuyers in the belief that prices will always go up and never decline. In this respect, I recall an occasion in 1996 when a real estate developer in Manila, where I was delivering a presentation, invited me to his house for dinner. After dinner he took me aside and told me “between you and me” and “in strictest confidence” a “little secret”, as he called it. According to him, property prices in the Philippines would always go up. Well, as I mentioned above, they are now the cheapest in Asia and my real estate “friend” is no longer in business…

[touchring]

Re: Marc Faber report from 2003 on 50% house price collapse

I think this was a great observation that Faber had in 2003 from one of his reports. This pertains to when housing prices decline to a certain amount even the most prudent individual would let it go and return the house to the bank.

http://www.gloomboomdoom.com/gbdrepo...ad/GBD0305.pdf

In it he states the following;

The reason for the low price level in Thailand, and in most other Asian countries, is quite simple. Thailandexperienced a collapse in its property market after 1997 and the Thai baht lost almost half of its value at thetime. Consider the following. A friend of my wife ran into some money problems prior to the 1997crisis. She took a mortgage loan on her house (also in the centre of Chiangmai, but smaller than ours andnot on the river) worth 10 million baht (at the time, about US$400,000), which she later couldn’t (or didn’t want to) pay back. The bank repossessed the house and sold it a few days ago for 2.5 million baht (because of the devaluation of the currency, now worth around US$60,000)! This case is quite interesting, not only because of the magnitude of the price decline (Tokyo real estate prices have declined every year since 1992 —altogether by around 70% — with the fastest decline in a decade occurring last year), but also because if a property declines by so much in price, even the most tenacious “Liebhaber” homeowner will be tempted to walk away from his property and let the bank repossess it! This is something that real estate lenders should consider when they lend close to, or even more than, 100% of the property value to homeowners and homebuyers in the belief that prices will always go up and never decline. In this respect, I recall an occasion in 1996 when a real estate developer in Manila, where I was delivering a presentation, invited me to his house for dinner. After dinner he took me aside and told me “between you and me” and “in strictest confidence” a “little secret”, as he called it. According to him, property prices in the Philippines would always go up. Well, as I mentioned above, they are now the cheapest in Asia and my real estate “friend” is no longer in business…

From 400k to 60k, that is a decline of 85%. Good luck to you guys invested in property funds in Asia.

[doom&gloom]

Re: Marc Faber report from 2003 on 50% house price collapse

I'll stick with productive farmland myself.

[ProdigyofZen]

Re: Marc Faber report from 2003 on 50% house price collapse

Haha come on! Of course I know that from 400 k to 60 k is not a 50 percent decline. I just put 50 percent as a generic observation. Clearly he is just stating that after a certain percentage collapse of the value of your home it's better to walk away. I'm sure it's different for every country/culture etc.

[touchring]

Re: Marc Faber report from 2003 on 50% house price collapse

Haha come on! Of course I know that from 400 k to 60 k is not a 50 percent decline. I just put 50 percent as a generic observation. Clearly he is just stating that after a certain percentage collapse of the value of your home it's better to walk away. I'm sure it's different for every country/culture etc.

Debtor's prison certainly didn't prevent home prices in Dubai to drop 70%.

At least not in Dubai where 90% of properties are bought by foreigners that don't ever need to step foot into Dubai again in their entire life after receiving the court summon to pay up.

[ProdigyofZen]

Re: Marc Faber report from 2003 on 50% house price collapse

Sure

[ProdigyofZen]

Re: Marc Faber report from 2003 on 50% house price collapse

Yea but 2/3 of UAE is non emirati and those people who lost 70 percent were foreigners of financial means . The poor workers could never afford a home there. Most of those people just left the country instead of dealing with the debt. For the most part it would be the poor non connected poor workers who would be put in debtor prison. I think I remember one family that ran into trouble because the husband had some illness it was a big story back in 09.

[Thailandnotes]

Re: Marc Faber report from 2003 on 50% house price collapse

Faber's example is completely bogus. I live in his home town. Real estate in Thailand lost 50 percent in US dollars because the baht went from 25 baht = 1 dollar, to 50 baht = 1 dollar. It didn't stay there long. Less than 2 years later the Thai baht had regained more than half that loss and continued to strengthen. Housing prices slid about 15 % in the worst year, but after a couple of years started heading back up leading to headlines claiming there was a new bubble. Since 97 the Thai housing market has had good years and bad. Overall prices are up, nothing like Tokyo's persistent decline. The woman who took out an equity loan made a huge bad bet, but the bank made an even dumber one selling the property at such an absurd price. Probably they sold it to a bank manager.