Signs that indicate the imminence or occurrence of a real estate bubble in your area
In this article, we will talk about everything important to know about the real estate bubble, which happens regularly and periodically in real estate markets, whether local or international.
It is a type of economic bubble that occurs as a result of large inflation in real estate prices very quickly, to reach a stage in which it exceeds the normal price by a huge difference, which causes a state of stagnation in the real estate markets and a decrease in demand, and then these prices suddenly begin to decline rapidly.
disadvantages of the real estate bubble
As we mentioned earlier, when the real estate bubble bursts, prices drop dramatically, which leads to the spread of speculation and the failure of borrowers to pay real estate prices because they exceed the market value of their properties by a large difference. Bankruptcy comes at this stage as a natural result of the real estate bubble bursting, in addition to the decrease in the possibility of obtaining a suitable property All this negatively affects economic activity in the country.
The increase in real estate prices is one of the indicators that indicate the imminent occurrence of a real estate bubble, which leads to a decrease in the number of people who can buy real estate, and then illogical and unrealistic price inflation occurs, and this matter is accompanied by a general strike on the purchase of the real estate, and one of the main signs of the real estate bubble It is the withdrawal of large investors and their withdrawal of profits when or before the bubble occurs.
The timing of the real estate bubble bursting
The real estate bubble continues to inflate until it reaches a stage where prices become irrational and do not reflect the real price of any real estate, and here the bubble finally bursts.
And if we want to go deeper into the matter further, we find that the real estate bubble results from the increasing construction as a result of the abundance of demand to a stage in which the demand decreases dramatically while the supply increases, and here the levels of sales are low and accompanied by a significant decrease in prices, but the matter does not stop at this point, but rather lies here a stage Understand the risks in the real estate market.
Here appears a group of signs confirming these risks, namely:
- The irrationality of real estate prices makes most investors unable to purchase real estate, which causes a decrease in sales and thus negatively affects the current homeowners.
- The decline in the general economic level, leads to a decrease in disposable income and a decrease in the demand for real estate, in addition to a lack of job opportunities.
- In the end, credit conditions and standards are tightened, which leads to the withdrawal of speculators from the real estate market, and prices begin to decline.
In the end, supply and demand should beo that prices are logical and realistically reflect the state of the market
