Guest Post: Stop feeding the sharks while you still can

Here's a guest post from "BubbleWarrior"

Stop feeding the sharks while you still can

We, the over-taxed and under-policed South African public, have been targeted by a cynical campaign of deception, that if left unchallenged, could ruin millions of us, and plunge our economy into a depression. The lie? That your home, my home, all our homes, are safe investments.

The truth is that if you own a home, or are thinking about buying one, you are in terrible danger right now.

First, three important facts:

1) There are no independent voices providing real information in the media about the impending catastrophe. Check your newspapers, the internet, the radio, or the television, and all you’re hear are the opinions of three or four “property economists”, endlessly repeated the mantra that property is safe, that its increasing in value, and that there are no shocks coming. And who do these commentators work for? ABSA, Standard Bank, and First National Bank. The same people who give you your home loan and whose massive profits are bulked by your loan repayments. Asking “property economists” for the truth is like asking a McDonalds executive about healthy eating. We don’t believe the police and politicians when they tell us crime is under control, so why do we so eagerly believe the banks when they say property is going up?

2) House prices can, and often do, drop. In parts of Japan prices have dropped 40% since the 1990s.

3) You get better returns by putting your money in your savings account. If you own a flat worth R750,000, the chances are good that half of that value is what you owe the bank: let’s say you’re paying R4,500 per month on your home loan. If you’ve got a tenant, they’re probably paying about
R4,500 per month in rent. So you’re back to zero outlay, zero income. For the moment, your property is increasing in value at about 5% per year. So every month it’s worth about R3,200 more than it was the month before. Thus your total ‘income’ from property is R3,200 per month – 5% on an investment of R750,000! Even the rip-off artists at the major banks offer better interest than this! (Of course if your bond is bigger, your return is even less.)

Maybe, like the vast majority of us who have been suckered by the banks’ propaganda, you’re thinking: okay, but I’m happy to wait. It might only be 5% now, but they keep talking about an upturn, and in 2008 or 2009 my property will increase by 20% or 25%, and I’ll sell it for a big profit.

Wrong.

The chances are that by 2009, your property will be worth 25% LESS than it is now.

House prices have begun to fall in the US, for the first time in 40 years. This is a massive event, and has been totally covered up by the international media, who are so heavily funded by advertising from the banking sector. If you heard about it, it was probably just another item
in the news, along with the day’s currency trends or another loss on the sports field. But this drop is a MAJOR FINANCIAL AND POLITICAL EVENT. The bubble in America – widely regarded to be the biggest economic bubble since the one that caused the 1929 Crash and the Great Depression – is
bursting. In three months that slowdown will reach the UK, and in another month after that it will reach SA. Your ridiculously over-priced home will lose 5% of its value, then, as more people realize that they’re being ripped off and start selling, prices will drop faster. Sellers unable to offload their properties will drop their prices even faster, until panic sets in and people are dumping property, selling to the first offer.

Within months, your R2 million house will be worth R1,5 million, then R1 million, then R750,000. But your bond repayments won’t drop. Suddenly you’ll be forking out thousands for a property worth not much more. In the US, the nightmare of Negative Equity has already begun to hit in some
area: people paying bond installments for a house worth tens of thousands more than the one they now own – for example, paying R7,000 per month on a flat worth just R600,000.

Are SA prices inflated? Absolutely. Think about it. Would you rather pay $200,000 for a modern, renovated one-bedroom apartment in downtown Chicago, with negligible crime, excellent public transport, a huge cultural center, shopping to die for, and a huge choice of work- and education opportunities, or would you rather pay $200,000 for an identical apartment in Cape Town, which has no functioning public transport, South African crime levels, massive pollution in winter, and crumbling infrastructure?

Or how about a three-bed apartment with high ceilings and wooden floors, built in the 1920; five minutes from superb public transport, in one of the most vibrant cities in the world? In Johannesburg or Cape Town you’re looking at a minimum of R1 million. In Berlin – the center of Europe, two hours from everywhere! – you’re looking at 80,000 Euros, or R750,000. Still think that SA property is ‘in line with the rest of the world’?

Stop feeding the sharks! Stop paying prices that are 40% higher than they should be! The bubble is bursting, and the bust is coming. Don’t be caught napping.

Sell today, and rent – and watch the fatcat bankers, the estate agents, and your neighbors panic!

Yours in the interests of fair trade and a boot up the fat arses of the capitalists who run our lives for us.