subject: Situations When The Property Prices Crash [print this page] You must have heard people say that the property is a safe and stable investment since its prices are not likely to decline. It is true that the property will not be sold for less than the amount which has been done for another property in the same locality. People seek higher prices for subsequent sales. It is another thing that the buyer might not be willing to pay the same. While this is the general trend in the property business, there are times when the prices of properties get reduced as well. This reduction could be for some particular unit or for all units in an area. Here are some of the reasons for the decline:
Occurrence of calamities
All those areas where the calamities are likely to strike and result in losses of life and properties would result in the reduction of prices. Earthquakes and other such calamities which strike without notice are likely to result in reduction of prices. On the other hand, the calamities which are likely to happen on a regular basis such as the floods would result in a general low price of property in the region where these are likely to occur.
Economic Recession
This is perhaps the most important reason for the decline in property prices. When there is a slowdown in the economic growth and the incomes of people are reduced or they get thrown out of employment, there is reduction or loss of incomes. This alters the investment and buying behaviour of the people who would now like to focus more on saving rather than investing or spending. At times, even the investments made earlier might be pulled back. The demand for properties as an investment avenue drops down. The builders might try to hold back the price-cuts for some time hoping that the situation would improve but a prolonged time of recession would see inevitable cuts in the prices.
Distasteful development of area or locality
If some areas get developed in some way which is not to the liking of the people and are distasteful to them, then the prices of the adjoining units will decrease. This is typically the situation when some wine-shop or restro-bar opens in a locality or when the area slowly develops into a recognised brothel area. This reduction is long term in nature. Increase in the rates of crime in an area would also prevent people from buying the properties.
Superstitions
For some particular properties, the prices would crash if some mis-happening has occurred in that property such as an unnatural death of a person and there is a superstition that the property is haunted. Sometimes, even the people spread false rumours about the property which shies away the customers. Since there are no takers for the property, the prices would automatically come down.
So, the reduction in prices of properties can occur in a short span of time, say when some calamity strikes, or it can happen over a period of time. Times of reduced prices are an opportunity to clever investors to make investments.
