GuyInTaiwan wrote:Omni: Have you read Freakonomics? The bit about selling your house is interesting.
I hadn’t read it, but I’ve had a look at some excerpts from and summaries of that chapter. There’s not really anything there that surprises me. I already have a pretty good idea of what to expect and what not to expect from estate agents.
Actually, I’ve had quite a mixed experience in buying and selling here.
When I bought my first place in Taiwan, and hadn’t any idea what to expect, I went to a couple of estate agents and had them take me to look at a few places, but didn’t see anything that suited me. Then I saw an ad for a newly built highrise that looked very promising, so I went to have a look, got shown around by one of the on-site sales people, found a flat that fitted my requirements very nicely, liked the price that she named, so immediately said that I’d take it. I meant that I’d take it for the asking price, since it didn’t occur to me that there’d be any room for negotiation. The sales girl gave me a funny look, hesitated a moment, and then suggested that I should offer a substantial bit less than the price she had named, and she was sure the construction company would accept it. I was pleasantly surprised, agreed with alacrity, and she duly got confirmation of sale at that price. I thought it was extremely decent of her, since I assume her commission was linked to how much she could sell for, and she had absolutely no need to help me get the price down like that when I’d already made it clear that I’d buy at the price she’d initially named.
Last year, when I sold my flat in Xindian, I had a taste of the sharp practice of estate agents. I was too busy to deal with it, so I entrusted it to my sister-in-law, who’s a novice estate agent here in Linkou. She found an estate agent in Xindian who had sold units in the same building, was confident that she could make a quick sale at my target price, and was willing to do it for a flat fee of just NT$100,000 (less than 2% of the asking price). I would pay the sister-in-law another NT$70,000 for her help (I was willing to pay more, but the wife said that would be enough). The Xindian agent quickly found a buyer at my asking price, and set up a meeting for the contract signing. When we arrived at her office, and before we met the buyer, she came out with some spiel about the NT$100,000 being a small commission, and that though she was sure the buyer was good for my asking price, she thought there was still room for getting a little bit more, so if it was okay with me, could she have a last round of negotiation with them and keep any extra she could squeeze out of them, to augment her slim commission. I immediately cottoned on to what she was doing, and understood that she’d already got their agreement to a price above my target, but since I was satisfied with getting my target price, I was happy enough to let her have a little bit more. The wife and sister-in-law, who were with me in that meeting, didn’t actually understand what she had proposed until I explained it to them, otherwise they might have objected or insisted that we split the difference (which is what I really should have done). Anyway, she soon came back to us to confirm that the buyer had agreed to pay NT$70,000 above my target price, meaning that she would get a commission of NT$170,000. Thus, I ended up paying total commission of NT$240,000 on a sale of just over NT$5.6 million, which was on the high side (more than the standard 4% commission), but I was still happy enough to get my whole target price in my pocket so quickly and easily.
headhonchoII wrote:Now the latest spin is that buying houses is the best way to deal with inflation. That is true only if interest rates stay low and asset prices stay high i.e. you can inflate the debt away over a period of time. If interest rates increase that is not true. Of course the journalists in Taiwan just repeat what spokesmen say, the profession of journalism is hardly a profession at all these days.
Major understatement, major alarm bells. Back in the early eighties, interest rates in Australia were something like 17%. Could you imagine if interest rates went up to just 5% here?! The streets would run red with rivers of blood.
Yes, even a moderate rise in interest rates is going to hurt a lot of people very badly. Governments and central banks are going to have to keep interest rates at or just above zero for as long as they possibly can, despite the many negative consequences that result from the effective loss of this key instrument of monetary policy.
Two decades ago, when I was getting 7% on my money in the bank, I assumed that such a situation would never change. I thought I'd be able to go on piling up money in the bank, and once it hit a certain amount, would be able to retire and live comfortably on part of the interest. Now, my money in the bank is earning next to nothing and effectively losing value with each passing month, but I don't see anywhere else to park it safely and profitably. If I sell my house for NT$15 million and put that money into the bank, it'll steadily diminish in value, so I'll be wanting to use at least a substantial part of it to buy another house as a relatively safe store of value. The big question is whether I rent first and wait for a sharp drop in housing prices so that I can buy something much better with my modest store of money, or buy something with half or more of that money now with a view to upgrading to something better if and when the crash comes, or put the whole of it back into another house that suits me better than the one I have now. I'm having a very hard time making a decision on this.