Italian Housing Bubble (A giemmeppi idea translated)
(Italian translation/Tradotto: Questa discussione è intenzionalmente in Inglese, per gli ospiti stranieri. Per piacere evitare commenti in altre lingue)
Welcome dear guest!
Current housing bubble is the largest
bubble ever seen in the recent economic history and it's causing lots of troubles around the world.
Housing bubbles are used to inflate periodically in Italy. The latest one bursted in
1992, due to credit crunch from '92 to '97, to italian interest rates growth and Lira svalutation, which made more expensive mortgages in Ecu and in local currencies for Germany, France and other countries.
Here you can see the results:
The phenomenon has been reproduced in a similar way. In the latest 3 years
interest rates have grown progresively until making impossible to buy houses as current prices are very high. Also, the interest rates growth caused the government bonds to have a higher revenue, destroying the mith of the "house as commodity" to protect your capital. Remember that bubbles are fed by several miths: the housing bubble has been fed by lot of miths, which we have deeply discussed and destroyed in this forum.
This history began in 2001, when interest rates began dropping to face the recession caused by 9/11. Banks started borrowing
"easy money" to everyone and for whatever amount, which
"addicted" the housing market, making prices to rise from 100% up to
300% depending on the area, whit peaks of 600% in some big cities central areas. Everything without any salay increase.
For some years things went well:
homebuilders 5x their revenues in respect their costs. But in the 2005 the market was already full, before interest rates began to rise.
Even in Italy, as in the USA, banks provided
subprime mortgages, which are mortgages backed by salary and requester's assets. The amount of each mortgage were high and at variable interest rate. This put Italy among the countries most exposed from this point of view, like Spain and EIRE.
Nobody knows, what will happen from now on. Surely,
house prices are dropping and the housing market crisis is in an advanced state.
Accordingly to Gabetti, Toscano and other official "sources", transactions dropped in the spring of 2008 of about 15% for the whole country and 25% in the big cities. Prices dropped in the average of 15% with peaks of 20%-25%.
Recently, newspapers and media are talking a lot about this stuff.
Here below we have a graph showing the
"Housing prices, rents and salaries evolution from 1991 to 2007" (source: Nomisma)
Pay attention to what happens starting from 2000.
[IMG]http://i38.tinypic.com/291gtwy.jpg[/IMG]
Enjoy!!!
[Modificato da dgambera 08/11/2008 12:39]