97T, regarding the housing crisis we’ll wait to see what happens here in Spain. Quick summary of the rising market syndrome here in Spain: ~41 million people here, plus a huge immigrant population of which many are illegal. 5 years ago there were almost 3 million dwellings empty and the rate of building here is, or at least was until a few months ago more than UK, France and Germany combined where there are about 190 million people. So how was the game played? (A) Person A has some money stashed away so they buy an apartment off the plan at X€ then sell it a year later when it’s ready to live in at X€ + 40%. Thing is that the deeds only get done when the dwelling is actually habitable and therefore never get to go in person A’s name so they get to pocket the +40% without having to pay tax on the earnings. Then they do it again and again.
(B) Person B already has a dwelling where they live but wants to get in on the housing thing so they buy the above dwelling. The bank loans them 100% of the value of the dwelling using the first dwelling as collateral. There’s no need to rent the place out (renting’s a risky business here) because they know that next year this place will be worth at least 20% more than this year.
(C) Couple C are young and only have €3,000 saved. Well in fact they didn’t save it as it was given to them by their parents. They buy a dwelling worth €150,000. Taxes to buy it are say another €22,000 = €172,000 total minus €3,000 deposit = a loan for €169,000 on a place worth €150,000
Now two years later the “real estate prices will never go down” economy suddenly finds that yes prices can go down and in fact one of couple C loses their job due to the downturn in the economy and they are forced to sell their dwelling. Now the dwelling is worth €130,000 but even at that price they can’t find anyone to buy it and their mortgage is for €169,000.
Yes, everything’s wonderful in a rising market. You can’t put a foot wrong. Then one day reality strikes home and everyone realises that you can’t have 4 million empty dwellings and keep building at a rate higher than several other countries put together.