Property Investments - The Imbalance in the Market

Property investments always sound so appealing in the sales brochures don’t they? Things like “guaranteed returns,” and “assured income,” sound especially re-assuring, but it is vital to look at who is making these claims. A lot of people got stung all over the world making property investments when the real estate market crashed.

And I am talking about normal, middle class people who lost their entire life savings in one fell swoop. This rarely gets talked about in the traditional media. Sure – they do the occasional “isn’t it awful,” special – and then the next day they are filled with “guaranteed returns,” all over again. Whether we are talking about the TV, the newspapers or any of the magazines. Why? Simple – they need the money. The only thing keeping the “traditional,” media in business is advertising from companies that rode the credit bubble.

But – the bubble has burst and what we have now is a sort of one-sided “recovery” going on that involves the stock market inflating while unemployment is rising. This is what is called a “jobless recovery,” and is possibly the scariest thing I have seen come out of the current credit crisis. The powers-that-be seem to be managing to inflate a very small section of the economy and call it a recovery. Does it really matter to the typical unemployed guy in the street if Wall Street is recovering?

Key to this recovery is the property investment business and what we also have is a one sided recovery going on there. The desperate need by the Government Inc to inflate real estate prices is causing yet another issue. And it is not exclusive to any one country. This is worldwide. In France, thanks to major tax incentives, the government Inc managed to squeeze a slight increase in new home sales. Ignoring the fact that this involves a repayment of almost 20% VAT to anyone buying a new home, the fact is that existing home sales have stopped almost completely. So there are literally millions of unsold properties sitting for sale, and the one sided recovery is benefiting the very few construction companies and creating a massive imbalance in the marketplace that means anyone already invested cannot sell their property.

The imbalance in the US is slightly different, but an imbalance nonetheless. The US banks are now the biggest property owners in the country and are sitting on millions of unsold foreclosures, with millions more foreclosures in the pipeline. So almost everyone with property is looking at a loss because these foreclosures will dominate the sales for the next 5-10 years and new builds are almost at a standstill – yet the Dow Jones rises on the news that Luxury home builders, Toll Brothers, only lost $472 million last quarter?

The so-called property investments I get offered in my email in box every day are sounding more and more desperate by the minute. There is something seriously wrong with this picture. Petty crime in France is going through the roof and a lot of it is to do with the widening gap between the haves and the have-nots.

The son of French President, Nicolas Sarkozy - at 23 years old – has just been nominated as prime candidate for the job of Chairman of EPAD, a quasi-government agency that oversees business development in La Defense, Paris’ premier financial district that handles billions of Euros of commercial investment – much of which comes from government sources – and my Taxe D’habitation (living tax) has just been doubled for this year.

“Let them eat cake,” is the phrase that comes to mind……..