Will the real estate market in Mumbai collapse?
UK property market: How expensive can houses be?
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Kingston is a popular suburb of London: good schools, green parks, great shopping centers, fast train connections to Waterloo Station - and single-family houses that are getting ten percent more expensive every year. They now cost around a million pounds. Liwei, a Chinese woman, renovated her home with pink marble stone floors, and thought about selling it for a long time before moving to Shanghai.
The neighbors are excited. Should Liwei get rid of her house for a million pounds, that would be the equivalent of more than 8,000 euros per square meter. So the whole street was waiting: the Persian, whose family had already moved to England at the time of the Shah, the French photographer with his South American wife, who can hardly afford the area anymore, the Indian entrepreneur with his family from Mumbai, the new family from Iraq and the English pensioner for whom everything is no longer English enough.
In Kingston you can see why a house has become unaffordable for many Englishmen. More and more wealthy prospects from Eastern Europe or Asia are getting a place to stay. According to a study, house prices in London have risen by 26 percent compared to the previous year, and they are also increasing nationwide. Those who are not among the new rich need an understanding mortgage broker. The salary is then calculated generously. And at the end there is a money house that finances the house purchase. Even if the customer is up to the ruff in debt.
Exactly that should stop now. The Bank of England and the British Treasury Department are alarmed that so many British people are again getting into debt to be able to get a chance on the British real estate market. That is why they have recently taken steps to curb the exuberance; on Tuesday of this week, the financial regulator published details of the new rules. Too often the country has this cycle of boom and bust Experienced: First the economy is doing better, house prices are rising, the banks are granting ever more daring mortgages - and then the role comes backwards. When the population can barely afford the higher interest rates and saves desperately or when their mortgages even fail. The banking crisis, the recession, quickly arrives.
Rising real estate prices are currently being watched with concern internationally. Also in Germany. Before the financial crisis, in many countries only the central bank interest rate was used as a lever to prevent excesses on the real estate market. That changed with the bursting of the bubble in the US and the financial crisis that followed. Overseers around the world are working on new tools to prevent blisters. Great Britain and Germany are different, but it is worth taking a look over the canal.
Nobody wants to intervene directly in prices on the real estate market. "That's not our job at all," said Mark Carney, head of the British central bank. Let the super-rich get £ 120million apartments at Hyde Park and put their nanny in a one-room apartment for £ 7million. Let Liwei sell her house for a million pounds.
It is more important to the supervisors that the normal population do not hold up debts that they can no longer service when interest rates rise. Interest rates are currently lower than ever before, but when the wind turns and loan terms are adjusted, real estate quickly becomes a problem. A first rate hike is expected in Great Britain this year - ahead of the USA and the euro zone.
So that the citizens and with them the financial system do not collapse under a burden of bad loans, the Bank of England has now for the first time imposed stricter requirements on the banks: In future, daring mortgages may not account for more than 15 percent of new business. A mortgage is considered "daring" if the loan amount is more than 4.5 times the annual salary. Young families in particular are burdened with such debts. The proportion of risky mortgages is now higher than it was just before the financial crisis. Some therefore wanted even stricter guidelines. According to British financial regulators, the new rule is due to come into force on October 1st.
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