Real estate bubble
A real estate bubble is a form of an asset bubble . This results in a significant overvaluation of real estate in a sub-segment of the real estate market that is delimited regionally and specifically for use. Sooner or later the market will peak; then prices fall. They usually fall sharply in a relatively short period of time (demand falls because, for example, many potential buyers expect prices to continue falling and / or because banks are no longer as generous as before; the supply increases, for example, because owners fear a bear market and want to “cash in” before prices fall further). However, it can also happen that nominal prices remain stable over a longer period of time and thus only real property prices fall.
Examples
- 1343–1346: Northern Italy
- 1887: Italy
- 1926: Land boom in Florida
- 1990: Office properties in Japan
- Early 1990s: Switzerland
- 1990s: Mexico
- 1999–2002: Office properties and apartment buildings in the " New Federal States " of Germany (due to tax incentives)
- 1985 resp. 2002 to summer 2007: Spain
- 2007: private residential real estate in the USA, -> financial crisis from 2007
- 2008: Ireland
- Late Summer 2017: Canada
causes
Credit-induced real estate bubbles
Credit-induced real estate bubbles result from a significant expansion and / or reduction in the price of real estate financing . The causes for this are manifold. The effect is often due to insufficient market transparency or insufficient market regulation .
A significant and systematic expansion of lending to borrowers with low credit ratings (“ subprime loans ”) results in considerable additional demand for real estate, which is limited to supply (due to the limitation of land as a resource). That happened z. B. in the USA until 2007. Rising demand usually leads to rising property prices. The same mechanism works with a significant reduction in the cost of credit, e.g. B. by a drop in interest rates. As a result, every borrower can afford “more” property with the same ongoing burden. Here, too, the increased demand is favoring rising property prices. If, as happened in the USA, if such factors coincide, no intervention by the responsible supervisory bodies, because z. If, for example, the positive economic consequences of the rise in real estate prices are wanted, and there is no counter-reaction on the part of the market to the rising demand for credit (through rising credit costs or interest rates), a real estate bubble develops. There is a self-sustaining development; ever more demand favors ever higher prices.
Fiscal-induced real estate bubbles
Government intervention in the real estate market, e.g. B. through special tax incentives, it can also lead to significant undesirable developments in the real estate market. Sluggish state control policy and sluggish market development (the construction of a property is regularly a project with a considerable duration) lead to undesirable developments that can be recognized too late.
In Germany, for example, after reunification, considerable investments were induced in the new federal states, including in office properties. The reason for this were tax incentives for investors in the real estate market. This triggered a building boom, which - after several years until the building was completed - met with significantly insufficient demand, so that the price of these properties plummeted sharply.
In connection with the introduction of the euro in 2002, numerous people and companies in Spain tried to “launder” black money in pesetas by buying real estate . This triggered a price increase. In addition, lending rates (nominal and real rates) fell significantly. The market developed its own momentum, which only stopped in summer 2007.
development
Numerous observers have seen a real estate bubble developing in China since the beginning of the 2010s ; several cities were built here “on the green field ” (“test- tube cities ”); Zheng Zhou New District was a ghost town for a long time ; likewise kangbashi . There are also high vacancy rates in Anting . In early 2017 there were signs of at least one dent in the bladder.
The well-known economist Nouriel Roubini held in 2013 "signs of overheating - if not downright bubbles - on the real estate markets of Switzerland, Sweden, Norway, Finland, France, Germany, Canada, Australia, New Zealand and once again Great Britain (more precisely: London) [for] recognizable. "In the emerging countries, says Roubini," bubbles are emerging in Hong Kong, Singapore, China and Israel, as well as in important urban centers in Turkey, India, Indonesia and Brazil. "
In mid-2014, warnings were issued for the USA against renewed bubble formation.
Given to rapid developing real estate and rental rates in certain regions, especially in metropolitan areas , the development of a real estate bubble is also Germany repeatedly discussed: for example increased in Berlin by the end of 2016 until the end of 2017, housing prices by an average of 15.6, in Frankfurt to 12.5, in Hamburg , Stuttgart and Cologne by around 11 percent. In its economic forecast for Germany from summer 2018, the International Monetary Fund (IMF) sees the risk of a real estate bubble forming in the major centers as one of the greatest risks.
prevention
At the end of June 2014, the economists Moritz Schularick (Uni Bonn), Alan Taylor and Òscar Jordà (both University of California ) presented a study that examined over a period of 140 years the correlations between loose monetary policy , lending, rising property prices and financial crises gives.
In order to avoid a renewed real estate bubble, the federal government wants to enforce a draft law since the beginning of 2017 that should regulate real estate financing with four points:
- Setting an upper limit for borrowed capital in a mortgage loan
- A certain portion must be repaid within a specified period
- Setting the ceiling on borrowers' debt sustainability
- Definition of a mandatory minimum amount for the repayment of loans.
Small loans and loans for real estate refurbishment and renovation should be excluded from this .
literature
- Wolfgang Münchau : Vorbeben: What the global financial crisis means for us and how we can save ourselves , Hanser Fachbuch, 2008, ISBN 978-3-446-41390-0
- Lucas Zeise: End of the Party - The Explosion in the Financial Sector and the Crisis of the World Economy , Papyrossa-Verlag, Cologne 2008, ISBN 978-3-89438-396-1 .
Web links
- visualcapitalist.com , October 8, 2018, Jeff Desjahrdins: The World's Biggest Real Estate Bubbles in 2018 ("The world's largest real estate bubbles 2018")
Footnotes
- ↑ Translation of the image description: The drainage of wetlands, the progressive construction of railroad lines and the expansion of the motorway network paved the way for the Great Florida Land Boom in the mid-1920s. The picture, taken a few years before the height of the speculative frenzy, advertises Florida as a haven for residents and a money machine for potential investors. Cities like Miami and St. Petersburg grew ten-fold in less than two decades as millions were invested in building homes and developing hotels. In 1924, Florida also amended its constitution to prohibit income and inheritance taxes, thereby giving investors and entrepreneurs more incentives to get involved in the area. Excessive land values and the uncontrolled issuance of ill-advised loans led to a speculative bubble that burst in 1925. The collapse of the Florida Land Boom was one in a series of events that heralded the start of the Great Depression in 1929
- ^ The Monetary Policy of Fourteenth Century Florence by Carlo Maria Cipolla
- ↑ bancaditalia.it: Economic Theory and Banking Regulation: The Italian Case (1861-1930s) , p. 18 (1 MB)
- ↑ Archive link ( Memento from April 23, 2008 in the Internet Archive )
- ↑ handelszeitung.ch: UBS-Index: Real estate bubbles threaten here
- ↑ Die Welt October 27, 2012: Prices on the ground: 800,000 properties are empty in Spain
- ^ Badische Zeitung: The real estate bubble is bursting in Canada - Economy - Badische Zeitung . ( badische-zeitung.de [accessed on October 18, 2018]).
- ↑ Archived copy ( Memento of February 14, 2008 in the Internet Archive )
- ↑ Benedikt Fehr : The way into the crisis . Frankfurter Allgemeine Zeitung , March 18, 2008 (accessed April 30, 2009)
- ↑ http://www.diw.de/documents/publikationen/73/diw_01.c.82227.de/08-17-1.pdf
- ↑ emagazine.credit-suisse.com ( Memento from July 13, 2012 in the web archive archive.today )
- ↑ ZB capital.de , June 2011: capital.de ( Memento from July 28, 2012 in the web archive archive.today )
- ↑ Ordos: megalomaniac ghost town . In: ZEITmagazin . ( zeit.de [accessed October 18, 2018]).
- ↑ Wendell Cox: ZHENGZHOU GHOST CITY ALIVE! www.newgeography.com, March 30, 2011, accessed January 17, 2018 .
- ↑ Falling prices: China's real estate bubble is running out of air . In: Spiegel Online . February 22, 2017 ( spiegel.de [accessed October 18, 2018]).
- ↑ capital.de : In slow motion on the real estate bubble (column, December 4, 2013)
- ↑ Real estate market: Greed is back . In: ZEIT ONLINE . ( zeit.de [accessed October 18, 2018]).
- ↑ Is there a risk of a real estate bubble in Germany? In: Home Buying Blog . ( hauskauf-blog.de ).
- ↑ Real estate market: Purchase prices for apartments in Berlin have risen by more than 15 percent . In: ZEIT ONLINE . ( zeit.de [accessed October 18, 2018]).
- ↑ IMF report: Germany's economy is doing well - still . In: ZEIT ONLINE . ( zeit.de [accessed October 18, 2018]).
- ↑ bgse.uni-bonn.de ( Memento from February 3, 2015 in the Internet Archive )
- ↑ FAZ.net June 18, 2014: Something is brewing on the house market
- ↑ FAZ.net June 19, 2014: Schäuble warns of a real estate bubble
- ↑ No real estate bubble: Government wants to make guidelines for building loans into law. Retrieved February 27, 2017 .