Weak mortgage puts land prices in decline

How the lack of credit reflected to the land market

In brief: Land market prices continue to fall, banks are reluctant to give loans for house building, the most Europeans continue to buy land only for their savings.

The global financial crisis has affected the real estate market in all possible ways. There are many factors that could affect the land prices crash. But all over of the world land prices have fallen so much that in the nearest future no one can make positive predictions.

In most cases, people buy land plot to begin the construction of private houses, but mostly thay go to the bank to ask for the mortgage, after they bought land already. People set aside money, accumulate amount needed to purchase land, and only then think about the possibility of taking credit for the construction of houses. That is why the lack of loans for purchasing real estate is not reflected in the land market as significantly as a general decline in incomes of citizens in many countries. But the lack of strong attachment to the banks did not stop the fall in prices in some regions – in two and even three-fold.

The market for ready-made proposals of private houses full of interesting suggestions for which prices seem to be much more profitable than building a new one with considerable expenditure of time and nerves. That is why people decide to buy a house then building ourselves. Speaking about large land plots for large-scale construction of apartment houses, the situation is extremely complicated. The absence of major investors in this market will occur in the future. Banks lend only if the developer has a project ready for at least 70%. The same applies to commercial land. Builders and developers are closely associated with banks, but banks do not often give credit for new projects.

Ukrainian Globalist
2010-07-19 08:47, Economics.

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