What makes you guys think, that it´s some kind of bublle, thats gonna burst?
As I mentioned in previous posts, I live in different environment, but very similar situation with the market.
During last few years, property prices skyrocketed. And I am talking about hundreds of percents. At first, it reach it´s top in the major cities and now it´s spreading to the rest of smaller cities. Villages and towns around cities are experiencing the same rises. At this moment, if you want to build a house, land will cost you much more than actual house.
I believe, that prices may slown down, but I don´t see any bublle here. People need places to live and this is the need, that never disappears.
A year ago it was believed, that corona will push the prices down, but since then, prices have climbed up dozens of percents (somewhere even more than 50%). The same, it was believed 2 or 5 years ago, that prices will go down. Some people lost their chance to ever own anything, while they were waiting.
There´s just too big demand and small offer. For every flat there are dozens of buyers and they are trying to bid out each other with higher offers or cash. Someone from this market told me, that once a developer builds apartment block with dozens of flats, one investor can buy half of flats immediately. The rest is also sold rapidly and we are speaking about timefrime even years before they start to actually build it. And statistics say, there are less and less apartment blocks built and less building permits given by authorities.
In major cities, rents went down, because AirBnB stopped working and students left, but it didn´t make prices go down. There´s situation, that mortgage monthly payment would be much higher, than paying a rent. Someone could think, that it might stop the prices but no. Thanks to privatisation of flats and land (which happened after revolution from communistic system), a lot of people bought it for cheap and now it has made them wealthy class (also together with foreign investors). They can buy these flats, because they have got money sitting on their bank accounts and properties will always be the best place to put the money in. In a long-term, they will always be winners and there simply isn´t any other option, what to do with money.
There are few more factors determining prices:
- It´s extremely difficult to start building from bureaucracy point of view (and it´s very long process)
- There´s less and less land
- Families are more atomized and much more people live alone (single life in small flat - you need much more of flats)
- While people go away from big cities, these´s stable income of new citizens to those cities - students to universities (education is free and majority of people go to uni) and foreigners to work in corporations.
- Except low income people and people working in services, people actually saved money during corona (they couldn´t spend it) and more young couples are trying to get a mortgage
And finally, people are much more financially aware. Previous generations didn´t care about this too much, because they had opportunity to live life-long in flats rented by state for regulated rent (very favorable). At this moment, young people don´t have such opportunity and there´s zero support from state.
Also, those who have multiple properties (let´s say they have inherited it or got it from their family), will never have reason to sell it (unless rare exceptions). They would rarely need that much cash and they could satisfy their material needs with average income, because they don´t have to pay rent and also, they have got side income from renting other properties.
