This Post is from: Overseas Property Mall, part of Fuzz One Media Group

International Property News Beat – Carlos Slim’s Mansion, Brazil Real Estate & Property Bubbles

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In what is one of the biggest ironies the world may have ever seen, because of stimulatory measures taken to stave off the effects of the financial crisis, several countries are now having to act quickly to avoid their housing markets overheating, and to curb the same irresponsible subprime lending practices that caused the crash in the first place.

The most notable of these is China. The government has recently enacted several policies aimed at cooling the housing market, which is rapidly inflating into a bubble, and the latest move is aimed directly at irresponsible and even fraudulent lending practices.

Directive 138 is specifically targeting the special relationship that is being forged between lenders and real estate agents.

This relationship has become particularly close lately as lenders recently started paying cash bonuses to realtors for bringing in business in the form of high value loans. This is because of the fierce competition for loans in the growing Chinese housing market. The authorities are keen to stamp out the practice because it leads to realtors not doing the proper checks on their potential clients, and even to the realtors providing false documents to the potential debtors.

This seems like an obvious consequence to those of us on the outside looking in; to the realtors it was a no-lose situation: it is in their best interest for their clients to get a mortgage, because that allows them to pay for the property, which gets them the commission there, so the banks adding a cash incentive only intensified their reasons to want the client to get a mortgage. Who knows why it wasn’t obvious to the lenders. It seems that greed is still blinding even though we now know what this greed can bring.

The signs that the overheating mortgage market is leading to a US style crash are already becoming apparent: According to China Net News, failure to meet mortgage repayments is an increasing phenomenon, resulting in rising instances of bank-initiated legal action, and nearly one million Yuan in economic losses.

Court sources show that in Haidian district last year, late mortgage repayments took 400 people to court, while Changping and Shijingshan saw a fourfold increase in similar cases compared to the year before.

To be frank, the world cannot afford a crash in China like the one that happened in the US, so let us all hope that the measures being taken are enough.

Photo credits: NigeJones via Flickr

This Post is from: Overseas Property Mall, part of Fuzz One Media Group

Chinese Authorities Fight Irresponsible Mortgage Lending – Sound Familiar?

The post Chinese Authorities Fight Irresponsible Mortgage Lending – Sound Familiar? appeared first on Overseas Property Blog :: guide to international real estate investment.

The Chinese housing market is seeing phenomenal growth in prices. Despite the global slowdown, property prices in Beijing and Shanghai have quadrupled in recent years, threatening to push house prices beyond the reach of Chinese families.

Because of this, and the fact that most people expect the phenomenal growth to continue, thousands of Chinese families are stretching themselves very thin to buy a house now, for fear that prices will spiral out of their reach in the coming months and years.

Despite a forecasted GDP growth of 8.3% this year to support growth in the housing market, the rapid rise in house prices and in speculation are still creating a massive bubble according to analysts.

According to Pimco, bank lending in China rose by 30% last year, thanks in part to lax lending standards. Signs of investment overcapacity are also beginning to show in China’s industrial sectors. According to one estimate, on an average day in 2009, more than 1,000 new industrial projects were initiated. This is one dragon whose roar is definitely being heard.

We have all seen the damage an Asian real estate bubble’s pop can cause: in the 80′s Japan’s property market was absolutely red-hot. When the bubble popped it cause a shock-wave that devastated the economy, the stock market and the balance sheets of banks. It was over a decade before the Japanese economy got back on its feet. Given the interlinking of global economies today, a Chinese bubble pop could bring a second wave of international economic misery on a par or possibly even worse than the first.

Thankfully the Chinese government is taking steps to cool down the market, for example it increased required bank reserves by half a percentage point earlier this week in an effort to slow lending. Other measures that have been proposed include: imposing taxes on certain property transactions and ordering more scrutiny of loans. Any Chinese family buying a second home must now make a down payment of at least 40%.

Whether or not these steps will be enough to prevent the bubble reaching dangerous levels is anybody’s guess. One thing is certain, we will all find out if they aren’t.

Photo credits: Poeloq via Flickr

This Post is from: Overseas Property Mall, part of Fuzz One Media Group

China Real Estate Bubble a Worry for the World

The post China Real Estate Bubble a Worry for the World appeared first on Overseas Property Blog :: guide to international real estate investment.