Sad predictions for the real estate market

October 12, 2010 at 3:08 pm Leave a comment

The International Monetary Fund’s World Economic Outlook is basically a survey of the economy of the world, which includes forecasts on major economic indicators, such as inflation, GDP evolution, etc.

The most recent World Economic Outlook dedicates a section on the prospects of real estate, a bubble that burst 3 years ago with effects in 2010 and the years to come. As the bust of the real estate bubble was not synchronized, the IMF puts the countries into 2 categories: bust economies and rebound economies.

In the bust economies, the housing prices continues to fall or is gradually stabilizing. This means that investments in the real estate and constructions sector are declining.

Rebound economies are seeing a rebound in real estate investments and housing prices.

Spain is mentioned in the category of rebound economies, as most recent estimates say that prices have hit bottom and are starting to climb up. Also, Spain is mentioned as a rebound economy also because of the better post crisis growth prospects.

Advanced economies are expected to recover slower because deleveraging is harder to do with selling real estate than with equity.

“For countries such as Spain and Ireland there is an additional reason to expect slow recovery. The feedback loop between credit and collateral prices created a construction boom, significantly distort-ing the allocation of resources. As a result, the construction sector grew disproportionately to other sectors of the economy and became the engine of growth in these economies.”

The recovery of the real estate market is slated to last about eight years, according to the IMF specialists

With all these booms and bubble bursts, one might wonder: how long before the next bubble?

What do you think?


Entry filed under: Housing, News, Real estate. Tags: , , , , , , , .

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