Add in the mix of investor speculations of flipping properties within a short period of time, this would be a full on bubble that is waiting to burst when affordability hit all time low and high risk investors cannot sustain their debt repayments, spiral into a domino's effect of firesales in order to avoid defaulting on their loans or bankruptcy. What makes this bubble even worse is when Speculated Demand far outweighs Supply which cause buyers irrational with FOMO (fear of missing out). When housing prices rise rapidly in a short period of time, there is a chance the market have gone too emotional and overvalued the properties they are purchasing, causing over capitalised risk to the market. Bubble definitionĪ bubble in general, formed by a layer of thin, fragile, yet elastic film that expand by inflating the inside with air, when a bubble being inflated too fast, it pop due to the expanding rate is quicker than the soap's elasticity rate can handle, when a bubble being inflated too large, it might pop, but sometimes, depends on the soap water's density, it survive and break off into a nice big bubble that all kids love, because the rate of expansion does not exceed the elasticity rate of the soap water, giving it enough time to expand.Ī housing bubble is similar. And then I will take you through a history journey of past housing bubble events to find some similarities and compare to what we are currently experiencing. So before we dive into a quick conclusion, let's get our head around what is the definition of a housing bubble. It defies everything that we learnt in Economics101, but are there anything that we may have missed? No doubt the global property market have shocked everyone especially many property experts and experienced economists, since none of them would even dare to think the property market could do so well during a global pandemic.
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