It is said, “Everyone who doesn’t have a home would like to buy one. Everyone who has a home would like to sell it”.
For a number of reasons, Poland is now at the peak of property prices. Over the past year, the price of property in Warsaw has risen by 21%. And investors are holding on to the flats they have bought without renovating them, hoping to sell them in a couple of years when the price rises to the sky.
How long can this continue?
It is believed that many large cities such as Warsaw, Gdansk and Wrocław are on the edge of a bubble that could burst in the very next few years.
Why could this happen? The cost of housing is already approaching 4,000 euros per square metre in some places, which is comparable to Belgium and Germany. But in these countries the salary of the average local resident is twice (or even more!) higher than in Poland. And then, at one point, it turns out that the buyer no longer sees the point in overpaying for concrete metres, and the bubble bursts.
Time will tell what will happen to the Polish market in the coming years. Our today’s story – about how the property bubble burst in 2006-2008 in Spain. Alas, this is not the first and will not be the last case: most countries sooner or later pass it. even earlier – in Lithuania and Latvia. Many “happy” property owners are still having to pay off debts, realising that the balance is still higher than the price of the flat on the secondary market.
During the few years preceding the crisis, the construction industry of the Kingdom of Spain experienced its “golden age”. And nothing foreshadowed that very soon in the country will appear in the tens of thousands of objects from the category of “property in Spain from banks”, and hundreds of families will be left homeless.
Indeed, until 2007, the mortgage became more and more affordable, Euribor rate fell, development companies grew like mushrooms after the rain. And no one wanted to listen to the opinion of experts who argued that this general prosperity will soon come to an end.
Prices for Spanish housing until 2007 rose at an unprecedented rate. Investors, believing that this will continue forever, stimulated construction. It even came to the fact that “in the open field” grew whole towns, which on credit bought up grateful investors. Among the buyers were residents from all over the world – from Great Britain to Russia. In the years leading up to the crisis, on the property made a fortune, and in a very short time. After all, it was only necessary to buy a flat, and after some time to sell it at a significantly higher price. The number of mortgage loans was growing. And very soon housing became significantly overvalued.
As a result, by 2008 the average family was paying about half of its total income on mortgage. Although 30% is considered a safe level. Just compare this figure with today’s average salary in Poland. This was one of the reasons for the mortgage crisis and subsequently the unprecedented increase in the number of mortgaged properties in Spain. At this time, the first signs of the decline of the construction industry: the pace of construction slowed down and the number of unemployed people began to increase. It was here that the employment crisis began, which we are witnessing today.
Meanwhile, in the press, many experts began to express the opinion that Spanish property is significantly overvalued. Sounded figures and 30 and 40%. And therefore, house prices will inevitably soon go down, analysts predicted. The most enterprising investors began to slowly get rid of the property, which was acquired solely for the purpose of resale. And in June 2008, prices began to fall.
At first, the decline was quite insignificant – by 0.7 per cent. After all, investors still hoped to get the maximum profit. But already in August another decline followed – 0.4 per cent. Developers also began to lower their prices, but buyers nevertheless did not become more. Potential investors decided to wait until prices fell more significantly. In addition, in the summer of that year Euribor reached its historic high of over 5%, which significantly reduced the number of people willing to take out a mortgage. And then came the global financial crisis, literally collapsing the Spanish market.
The mortgage crisis in the kingdom became one of the main causes of economic difficulties – just as it was in the United States. So why were the Spanish unable to cope with the debt burden?
A few figures can illustrate this. Families who in 2007 took a mortgage of 150 thousand euros for 25 years, since 2008 after recalculation began to pay 58-70 euros a month more. At the same time, unemployment was also rising. As a result, by the end of autumn 2008, many debtors were forced to put their homes at auction, increased and the number of mortgaged property in Spain. In the country’s market began a recession, which we are still observing. Only some regions of the country are now showing the first signs of coming out of it. Among them – Madrid, Barcelona, the Basque country. But in the main territory of the kingdom, prices have not risen, and the abandoned towns, which now nobody needs, continue to be destroyed. When this process will end, no one can yet predict.
