Property Values?

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thisisreallycomplicated
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Re: Property Values?

Post by thisisreallycomplicated » Tue Oct 06, 2015 3:46 pm

If I'm reading this chart correctly:
http://www.tradingeconomics.com/chile/housing-index

"normal" is about 100, and prices are currently at about 165. So a 40% drop would bring them back to "normal". Or prices could just go sideways for a very long time. I have no idea how accurate the chart is though. Were prices normal here, back in 2007? If not, then "normal" is probably lower than 100.
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Re: Property Values?

Post by admin » Tue Oct 06, 2015 4:58 pm

Super take those charts with a grain of salt and a shot of pisco. 40% over what? Chile did not go through the 2008 mortgage bubble, just comparing that year against other countries makes no sense, let alone chile.

40% where in chile is likly a more relevent question?


40%, divided by 7 years, is not much of a bubble anyway.
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Re: Property Values?

Post by admin » Tue Oct 06, 2015 5:07 pm

The bubbles in chile are very localized. Mostly where the big developers have super saturated a market percieved by the niddle class to be the "it" place. Few km one way or the other, no bubble. I would say it is more like real estate chicken pocks.

Even among those bubbles, a serious drop in prices, will suck in a lot of lower to middle class that could not afford to buy there before but always wanted to. Thus, the bubble is really not all that bubbly. Market correction, market rotation, perhaps.

Keep in mind in santiago (few other places), a lot of foreign money that has tied up large portions of office and apartment building avaibilty for years, left when the peso / copper dropped. So, lots of slack created by their exit and lack of presense in the market. Will take a while for that over supply to be absorbed by the domestic market, and the big builders to put the breaks on projects that are two to three years out.
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thisisreallycomplicated
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Re: Property Values?

Post by thisisreallycomplicated » Tue Oct 06, 2015 5:40 pm

admin wrote:Super take those charts with a grain of salt and a shot of pisco. 40% over what?
I'm assuming (possibly incorrectly) that 100 on the chart is the "fair" price, not overpriced or underpriced. So if the chart stayed at 100 forever, that would mean houses were always at fair price (whatever fair is), most likely increasing at the same rate as inflation, assuming the actual value (not price) remained constant over time. So if the chart is now at 165, it would take a 40% drop to get back to a fair price, consistent with inflation.

The chart starts in 2004 at 100, and remains at 100 through 2007, which is why I'm assuming 100 means fairly priced. But if people were already noticing in 2007, that prices had been going up a lot, the fair value could be lower than 100. I didn't get here until 2011, and I only know that people were already talking about how prices were going up fast. I just don't know when they started noticing.
admin wrote:Chile did not go through the 2008 mortgage bubble
So prices weren't growing faster than inflation (and actual real value) yet in 2008? If that's the case, then 100 on the chart is probably about fair value.
admin wrote:40%, divided by 7 years, is not much of a bubble anyway.
Assuming I understand the chart, and the chart is correct (a lot of assumptions), it would take a 40% drop for current prices to get back to fair value. Or they could stay flat, until inflation catches up. 40% is a lot to me, but it may not be very much to someone else.

All this is based on the real value remaining constant, which may be almost true on average. But I think land in Chile is actually getting more valuable on average. But I don't think the value is increasing as fast as the prices. I'm also making assumptions on what the chart's definition of "housing index" is, since I didn't see the definition on the site.
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Re: Property Values?

Post by scandinavian » Tue Oct 06, 2015 5:48 pm

how would you define "fair price"?
I would assume that 100 is the value at the start of the range. So if they started gathering stats in Chile in 2004, then 2004 = 100.
Check UK for example at 656...

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Re: Property Values?

Post by thisisreallycomplicated » Tue Oct 06, 2015 5:56 pm

thisisreallycomplicated wrote:
admin wrote:Super take those charts with a grain of salt and a shot of pisco. 40% over what?
I'm assuming (possibly incorrectly) that 100 on the chart is the "fair" price, not overpriced or underpriced. So if the chart stayed at 100 forever, that would mean houses were always at fair price (whatever fair is), most likely increasing at the same rate as inflation, assuming the actual value (not price) remained constant over time. So if the chart is now at 165, it would take a 40% drop to get back to a fair price, consistent with inflation.
In other (much shorter) words, I'm assuming the chart is inflation adjusted, and 100 is the arbitrary value they chose to represent "fair". Or maybe average, mean, or some other statistic would be more accurate than "fair". In any case, I would expect prices to eventually return to 100, and possibly even dip a little below.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

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Re: Property Values?

Post by thisisreallycomplicated » Tue Oct 06, 2015 6:19 pm

scandinavian wrote:how would you define "fair price"?
I would assume that 100 is the value at the start of the range. So if they started gathering stats in Chile in 2004, then 2004 = 100.
Check UK for example at 656...
That's a good question, and I don't have a precise definition. But right now prices definitely seem too high to me. And I don't think they'd be underpriced, if they were 40% lower. I remember back before the housing bubble burst in the US, and my landlord told me he'd give me a good deal on the house I was renting. My immediate impression was $40-60K would be a good deal. So I asked, and he said something like $160K, and I almost fell over. I remember warning people back then not to buy at the ridiculous prices, but noone believed me. Then the market actually crashed.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

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Re: Property Values?

Post by Britkid » Tue Oct 06, 2015 7:33 pm

I don't think that regression to 100 theory feels right, I mean the UK is at 662 and Spain is at 1476, those are not going to return to 100. What might be interesting would be a graph that shows the price of the average house in Chile as a starting point, and then one that removed inflation might be a bit better, and then one that showed the ratio between the average salary and the price of the average house maybe.

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Re: Property Values?

Post by john » Tue Oct 06, 2015 8:31 pm

Britkid wrote:I don't think that regression to 100 theory feels right, I mean the UK is at 662 and Spain is at 1476, those are not going to return to 100. What might be interesting would be a graph that shows the price of the average house in Chile as a starting point, and then one that removed inflation might be a bit better, and then one that showed the ratio between the average salary and the price of the average house maybe.
Interesting observation, which I share, and good suggestions for obtaining better clarity on home price movements.

A friend sold his apartment in Viña six months ago (may well have been at the peak) for 30% more than he purchased it for in late 2008. However, looking at it from today's perspective, the combination of inflation and the declining CLP exchange rate would indicate that it was essentially a break-even situation as he used euros to pay for it. Fortunately, coincident with the sale, he purchased a large old dilapidated home (with a wonderful ocean view) in Recreo and had it renovated...he is an architect and so elected to be his own contractor. The renovation looks great and he and his wife are now living on the top floor and have already rented out the two apartments on the ground floor.
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thisisreallycomplicated
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Re: Property Values?

Post by thisisreallycomplicated » Tue Oct 06, 2015 8:54 pm

Britkid wrote:I don't think that regression to 100 theory feels right, I mean the UK is at 662 and Spain is at 1476, those are not going to return to 100. What might be interesting would be a graph that shows the price of the average house in Chile as a starting point, and then one that removed inflation might be a bit better, and then one that showed the ratio between the average salary and the price of the average house maybe.
The UK and Spain are different indexes, like the SP500 and Shanghai Composite are different. So the numbers aren't going to be the same. Are prices in Spain more than double the prices in the UK? And 9 times more than Chile? I'm only guessing though, at how the numbers in the Chile index are derived. So 100 may not be "fair" value. And the chart may not even be inflation adjusted. But it seems consistent with what I know, so that's what I'm sticking with for now.
“Now it’s conspiracy – they’ve made that something that should not even be entertained for a minute, that powerful people might get together and have a plan. Doesn’t happen, you’re a kook, you’re a conspiracy buff!” – George Carlin

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Re: Property Values?

Post by El Chupacabra » Wed Oct 07, 2015 9:06 am

Thank you all for your input.
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Re: Property Values?

Post by GringoVikingo » Wed Oct 07, 2015 10:19 am

Prices today, and let say 5 year in the future?

Looking whats happen in Europe. Chile may be attractive for those who can't afford New Zealand.
Europe is on the way to remove borderline, and let Turkey (80million) take their pick.
Germany, UK, France and Scandinavia as most popular.

Sweden have today 55 official no go Zone.

http://swedenreport.org/2014/10/29/swed ... -go-zones/
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