What is a real estate bubble
Mainly metropolitan areas affected What is a real estate bubble?
The low level of interest rates has encouraged many families to now fulfill their dream of owning their own home. In many cities and towns, this high demand has caused property prices to skyrocket. There is increasing talk of the real estate bubble bursting. The picture is entirely appropriate: If the price level is overstretched, the bubble bursts and real estate prices fall significantly. Highly indebted property owners then have a problem as the banks demand more collateral for the loan.
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The essentials in brief:
- The bursting of a real estate bubble can usually only be recognized afterwards.
- A real estate bubble affects not only buyers but also tenants.
- Not all cities and municipalities are equally affected by rising real estate prices.
- There can be many reasons for a real estate bubble to develop.
Reasons for a Real Estate Bubble to Form
One of the causes of a real estate bubble can be too loose loan management. I am sure you remember vividly the so-called subprime loans granted by the US banks. The legislature also wanted to enable people to own a home who would not have received a loan at other times. This loose lending fueled the price trend. When the bubble burst, low credit homeowners were ruined and the entire banking system was shaken around the world. Incorrect tax incentives are another trigger for rising property prices. These can lead to a fatal oversupply on the real estate market.
If the price level is overstretched, the bubble bursts and real estate prices fall significantly. "
The current situation
The large cities of Berlin, Munich and Hamburg are particularly hard hit by rising property prices in Germany. This not only makes it difficult for prospective buyers. The rising real estate prices also have an impact on the level of rents. Anyone looking for an apartment in a good location in the capital or Munich today has to dig deep into their pockets.
Some experts fear that it could already be a real estate bubble. Others do not see this danger and justify their optimism with the strict guidelines for the issuing of loans.
Anyone who takes out a loan in Germany must provide evidence of equity and a solid credit rating.
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