This post is relevant in ALL western countries that have housing estates, property developers and Government land releases for residential development. It also can explain how and why the Financial Bubble boost and the simple fact it can happen again.
How does a housing price actually work?
A housing price is made up of a number of things; primarily 'supply and demand', but also location on map, essential services availability, shopping/entertainment, education, road and rail networks, noise and pollution and athsetics (trees, parks, gardens, etc).
What can affect a housing price?
Any change of the above mentioned factors can affect the value of a property. The most dramatic being that of 'supply' as seen in the Global Meltdown when prices of houses dropped like domino's as people were unable to purchase. This affects Mortgages dramatically.
So what happens when the values change?
When a change occurs, the overall value of the property drops, depending on their depth of the drop an event occurs that is known as 'Over Capitalisation". This is when the Asset is suddenly worth alot less than the value of the loan. This then creates a complicated situation where the loan payments are still the same, but the property re-sale value has been completely damaged.
TBC
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