Real estate markets in developed countries are overheated. The situation on them resembles a soap bubble, ready to burst at any time. It is typical that in the markets of some countries, such as the UK, price reductions have already begun. Experts argue that the cessation of rising prices and the emerging tendency to their decline reflect macroeconomic instability in the euro area. Experts also believe that problems with the adoption of the EU constitution will negatively affect the real estate markets of the EU candidate countries.
In the past ten years, real estate markets in developed countries have grown at a fairly rapid pace. For example, according to The Economist magazine, since 1997 real estate prices in the UK have increased by 154%, in Ireland – 192 %, in Spain – 145 %, and in South Africa – generally by 244 %. Moreover, prices have been growing most actively in the last five years. During this time, the total value of assets in key real estate markets has grown from $ 30 to $ 70 trillion. According to The Economist, the reason for the sharp increase in real estate value was increased demand, which in turn was caused by low interest rates on loans, as well as a low level of investor confidence in securities, in particular shares. Investors preferred to invest in more reliable real estate, which led to overheating of the market. Thus, the real estate markets of developed countries faced the same problem as the Moscow market – with too high a level of investment demand, which by definition is a destabilizing factor.
Prices in most countries are too high, which makes the acquisition of real estate less affordable enterprise for the population. Most experts suggest that over the next five years, a decline or stagnation in prices is more likely than continued growth. Among the reasons are the revaluation of real estate in a number of countries, as well as a high level of investment demand. Obviously, people who buy real estate for the purpose of investing and making a profit will try to sell it if prices start to decline, which will lead to an even greater drop in prices. However, it is obvious that there will not be a sharp drop in prices – nevertheless, the real estate market is more conservative than the stock market. Nevertheless, experts believe that prices will decline in the next five years. Yes, also the problems with the adoption of the constitution of the European Union can also negatively affect the real estate markets of European countries.