What is the real estate bubble, discover everything you need to know

Blog » What is the real estate bubble, discover everything you need to know

 

What is the 2008 property bubble?

 

EEUU

At the end of 2007, there was the so-called subprime mortgage crisis in the United States, a good way to start revealing a bit about the real estate bubble of 2008.

Subprime mortgages, basically, were a wave of bank loans that were granted to people with very low credit support. It was sought with these actions, after the fears of the attacks of April 11, 2001, to reactivate the economy. Specifically, the interest rates for mortgage loans were drastically lowered, creating a business based on the illusions of people who did not have enough support to assume the payments and the imminent rises in mortgage interest rates, the latter due to the real estate and stock market speculation that generated the frantic increase in the demand for housing in these conditions.

The bubble burst and real estate prices plummeted. People lost their homes because they could not continue paying a mortgage that was worth four times more than the value of their home. There was the bankruptcy of Lehman Brothers, one of the most important banks in the United States. And a serious liquidity deficit. Evidently, all this had international consequences.

 

Spain

In Spain, a very similar case occurred. Now, more specifically, what is the real estate bubble in Spain?

Seeking that young people could buy their own house and live the golden dream, in 2001 a new land law was created that attracted a lot of investors, and the real estate construction business skyrocketed. As expected, this attracted countless speculators and the price of housing gradually began to skyrocket. With all these measures, young people had jobs in the construction business, but, while housing prices were rising, salaries were frozen. Here banks appeared to offer juicy mortgages to people who had little credit support.

Finally, by the end of 2007, the subprime mortgage crisis in the United States was the final trigger that caused the real estate bubble to explode in Spain. There was a lack of liquidity in the financial system. House prices fell drastically. People lost their mortgages by not being able to continue paying the old value of the flats and the high interest rates. The unemployment, the crisis and the recession arrived.

Who is responsible for the housing bubble?

As with almost all problems, there is no just one responsible. The question could be reformulated as follows: who are responsible for the housing bubble?

  • Buyers for getting into mortgages that they could not pay in the future.
  • The institutions for creating complex financial instruments with little responsibility and planning.
  • Banks for not reviewing the history of their customers.
  • And the institutions of the State for not taking letters on the matter.

Is there currently a real estate bubble in Spain?

As of today, September 2018, despite strong rumors about a possible return to the bubble, we, ESTE Real Estate, real estate agency in Malagabelieve that there is not enough evidence to believe that there is a bubble today.

In the informe de la agencia de calificación crediticia Standard&Poor'sexperts in the field argue why there is currently NO real estate bubble in Spain.

The main reasons are based on the following data: while in 2006 955,000 property sales were carried out, in the last year we talked about 542,000. If in that year they were granted 1.3 million mortgages, currently the figure does not reach 400,000. And if in the middle of the bubble there were more than 800,000 flats per year, now 10 times less is built. See article El precio de la vivienda seguirá en 2021 por debajo del nivel del Boom.

When will the real estate bubble in Spain explode again?

When the real estate bubble will explode in Spain will depend on the political, financial, social and economic maturity that Spain has to address this new real estate future.

We can already speak of different attitudes to address the problem: for example, banks have many more controls when granting mortgages, and you can not hear that boom slogan "calm, floors never go down!" On the streets. Now, it's time to wait. Not everyone learns from the mistakes of the past.

How do you say real estate bubble in Spanish?

How to say real estate bubble in Spanish can be answered in one main way: Burbuja Inmobiliaria.

 

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