Real Estate and the Stock Market - What's the correlation ?
The Telegraph :
The volatility in the stock market is beginning to have some ruboff effect on the booming real estate business as well.
Industry sources say real estate developers who had seen great amount of money flowing into the industry are now witnessing a drop in inflows.
“The choppiness of the equities market will gradually have its effect on the real estate market. Not only will there be a stabilisation of prices, but there could be a slide in property prices,” said Ambareesh Baliga, vice-president, Karvy Stock Broking. The prices in the real estate market had risen because of the speculative investors in the market.
“Speculators generally have exposure in all the markets ? equities, real estate and commodities. The past week has seen a downturn in two of these markets, the equities and the commodities market. As a result, investors will also reduce their exposures to the real estate market,” he added.
“I will not say that the money has totally stopped flowing. Demand today outpaces supply, but yes, there has been a little drop in the money coming into the real estate market from the stock market,” said Ram Prasad Padhi, a realtor from Mumbai.
“Usually, every week, there is some hike added to the cost of the property still under construction. In the past week, during the time that the market was volatile, developers have actually stayed away from any such hike. They will wait and watch for the market to stabilise to factor in any such hike,” said a real estate consultant in Mumbai.
The last few months have seen the real estate prices, both residential and commercial, rising steadily. A rising stock market has also helped in fuelling the real estate prices. It is estimated that close to 10 per cent of the money from the stock market was coming into the real estate.
The number of secondary market buyers, people who go in for long term loans to buy property, have stuck to the market.
“In the last twenty five years, whenever the stock market has fallen, the real estate sector has risen. This is the first time that the real estate market has risen along with the equity market. This doesn’t necessarily mean that it will also fall with the equity market,” said Mukesh Patel, head of the Neelkanth Group.
“We may see an effect of the falling equity market on the real estate market in some time, there will not be any immediate effect. We will have to wait and watch,” he added