Sokes wrote:JJJ wrote:Sokes wrote:I wonder how Southern Europeans who have a much higher proportion of own housing would like it if housing markets in their countries become unaffordable.
That's exactly what happened in the years leading to 2008. The policy of zero interest rate ...
After 9/11 interest rate of ECB went from 4.75 to 2%, but then later up again. I believe close to 0% is after financial crisis.
What did the Spanish do with all this housing? Were old houses too uncomfortable, was it a movement to cities or did the flats remain empty as an investment only?
Was there a similar expansion in industry? Was it already overheated before 2001? When did the excesses start?
It was a bubble, and as with all bubbles people bought to sell, not to occupy. You would remortgage your house to buy another one, you would buy a house still in planning stage and sell it once completed for a handy profit. A lot of those new developments were never actually occupied because tenants would get in the way once you wanted to flip it to the next moron.
People who could only afford their own house just paid more for it but for the most part just hoped that they were making it up because their home was increasing in value (even today home ownership in Spain is almost 80%, at the time it was around 90%)
Business owners of all kinds would invest in land and/or properties because it would give much better returns than their own business. You were an idiot if you didn't put your investment in property and other industries became neglected because it made absolutely no sense to invest in anything other than property.
The profits from building were so high and local budgets so dependent on property taxes and building permits that corruption skyrocketed to never seen before levels.
Older houses became the home for the hundreds of thousands of unskilled migrants that were needed for construction jobs.
And then in a record time it all came down. All those fancy developments remained empty or unfinished, and millions ended up without a job and with negative equity in their mortgage.