Quote:
Originally Posted by neustria
Foremost comes to mind the US, where the decline in house prices has actually CAUSED the current woes in the DOW and the S&P 500. So Wall Street sneezes and the stock markets in London, Paris, Madrid, and Frankfurt all catch a cold. Does this mean that the effect on their respective real estate markets will for all also be identical?
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Decline in house prices in the US meant that people couldn't cover their mortgages which meant that subprime mortgages defaulted which lead to high risk securities showing a negative growth, which lead to panic amongst shareholders who couldn't differentiate high from medium and low risk property securities which lead to the dive of numerous international investment banks and hedge funds who had invested in this market which lead to the stock market concerns and the worry about a recession.
Look at it as a shift in trends. In 2003, US government sponsored Fanny Mae and Freddie Mac represented 76% of mortgages whereas Wall Street represented 24%. In 2007, the ratio was 43% govt sponsored, 57% Wall street.
The fact that property prices are down in some regions may mean that people are more interested in investing in overseas property in locations where the forecasts are more optimistic.