It’s been blatantly obvious for some time now that our credit-fueled prosperity party has now come to a rather abrupt end. The fallout from such a house of cards collapsing has been felt by just about every sector of the economy and almost every consumer. Those of us that still have jobs are busy putting away whatever we do earn like squirrels getting ready for a long winter (though they’re increasingly less long) and the little guy to the world’s largest wind farm is feeling the pinch. Foreclosures are on the rise here in the states along with job losses, but one has to wonder how things are going abroad. How are other countries’ real estate markets faring? Not as well as you might think.
The UK is right along with us in it’s share of housing problems, and in some cases they’re doing worse than we are, if that’s possible. Emerging economies like China and India had their own share of housing bubble factors, and those too are starting to unwind as well. Here’s an example of the situation in China as of late April:
“In Shanghai, some one million residences were under construction in 2006, which was just half the amount of new construction in the entire U.S. in 2004, according to the Houston Chronicle. With Shanghai representing almost 20 percent of China’s property value, the bubble is seriously on edge, with many homes remaining empty. Shanghai’s property vacancy rate is roughly 25 percent, well above the international average of 10 percent, according to The New York Times. “
The global economy continues to stall, speculators in markets like real estate in Shanghai are seriously feeling the pain. There’s a glut of completed properties, and other parts of the country are reporting similar situations as well. It may even be worse than the tea bubble. Yet Chinese banks may by and large be able to weather that storm. A key difference being that Chinese banks haven’t been as deeply involved in sub-prime lending as their United States counterparts. About 20 percent of the outstanding loans are in real estate and are in the form of mortgages or credit to developers, as per the World Bank.
Ultimately the real estate crisis may be continuing to cause billions of dollars in losses here, and it also seems likely that things will get worse before they get better. Yet it’s also important to realize that the economic problems wracking the country are not entirely unique, and collaborative efforts on an international level will be key in pulling us back toward sustainable growth.
Last 3 posts by phillenbrand
- Loan Modification Fix - July 20th, 2009
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