2007 was one of the worst years for the global economy. Prior to 2007, property prices were at an all-time high, and millions of people were interested in buying new houses. Banks were freely giving out loans and mortgages to homeowners, with ratings agencies and regulatory firms all in on the game. Only a handful of fund managers and companies were able to figure out that the whole market was based on artificial bonds and funds that had been inflated and packaged together with dirt-cheap mortgage bonds.
In 2007, the property bubble burst. Even though the collapse originated in the United States, markets across the globe began to crash drastically, and the government eventually had to agree to a trillion-dollar bailout. It wasn’t easy to get out of this economic crisis. Some of the world’s biggest companies had to either close their doors permanently, or lay off a significant number of their employees. Since then, property investors have been extremely cautious about the property markets. The memory of 2007 still remains quite fresh, and the wounds haven’t healed yet.
Are we heading for a new property bubble? Companies such as JLL, which track values of investment in property markets across the globe, have shown soaring demand for commercial real estate as well as an insatiable appetite for investors. But most of the investors have already seen what happens after a period of sustained growth, and are wondering what lies ahead. It seems that most of the investors are currently trading in the market with their handbrakes on, which is why the market is unable to rise to the heights it once did.
The West: A Haven for Foreign Investors
Foreign investment in the United States is at an all-time high. Almost 60% of the outbound investment from Asia is directed towards the United States, and according to a recent study, there’s a huge shift from the East to the West. This might seem like a counter-intuitive move, since the market is at a pretty uncertain stage, especially when you consider the looming threat of inflated interest rates.
However, rather than taking the threat of rising interest rates seriously, investors are actually considering it to be a sign of economic prosperity and are putting in more and more money.
One thing that is likely to have a significant impact on the future of the property market is the Brexit campaign. The values of the pound reached the lowest level against the dollar in the past 30 years ever since the referendum came out in favor of the United Kingdom leaving the European Union. Property values tumbled, and many companies began offering Brexit proof clauses to customers before the referendum was even held. It remains to be seen how Brexit would actually impact prices of property markets and foreign investments from Britain, though within the country, the long-term effects might be more damaging than they look right now.