Real estate prices have been rising steadily since the end of the financial crisis. The effect of rising prices was somewhat dampened for years by the continuously falling interest rate level. In the meantime, however, interest rates have reached their lowest point and further reductions in financing costs are hardly possible.
At the same time, inflation is rising. In normal times, this also means a rise in interest rates sooner or later. Many who are flirting with the construction or purchase of a property have therefore caught a kind of panic at the end of the gate. It is important to get hold of a house or apartment quickly, as long as prices have not yet exploded completely and interest rates have not yet risen too sharply.
Experienced observers of the real estate market are shaking their heads more and more when they see that, as in Great Britain, dizzying prices are also being charged for properties in need of renovation. Anyone who pays them and finances the purchase and the upcoming renovation of the property for the most part with a mortgage then has good reason to fear interest rate increases.
Real estate purchase without viewing
In the USA, potential buyers are sometimes ready to exceed the asking purchase price by more than 50 percent with their bid, and more and more houses for owner-occupiers are being bought without any viewing appointment. The fear of ending up without a property is too great.
The buyers have gone into a real buying frenzy and who can blame the sellers for accepting the offered money with thanks? Sometimes there is sheer hardship on their side too. Especially when they too want to use the money they have raised to buy a new property in another city.
Because these excesses can now be felt not only in the USA but all over the world, the fear of the real estate bubble bursting is growing. Central banks, which have to stop non-temporary inflation with higher interest rates next year, could topple the fragile market.
Stagflation like in the 1970s would be fatal
If the economy stutters because the companies cannot pass the increased costs on to customers in full via higher prices, there is a risk of higher unemployment. It should be the first to put financings that have been sewn on edge into trouble.
If these objects are then also put on the market as foreclosures and if the latter is no longer so receptive due to the increased financing costs, there is a risk that quite a lot of air will quickly be released from the abundantly inflated balloon – be it controlled or with a loud bang.
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