Real estate economics is the application of economic techniques to real estate markets. It tries to describe, explain, and predict patterns of prices, supply, and demand. The closely related field of housing economics is narrower in scope, concentrating on residential real estate markets, while the research on real estate trends focuses on the business and structural changes affecting the industry. Both draw on partial equilibrium analysis, urban economics, spatial economics, basic and extensive research, surveys, and finance.
The 2000s United States housing bubble was a real-estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2011. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States.
A housing bubble is one of several types of asset price bubbles which periodically occur in the market. The basic concept of a housing bubble is the same as for other asset bubbles, consisting of two main phases. First there is a period where house prices increase dramatically, driven more and more by speculation. In the second phase, house prices fall dramatically. Housing bubbles tend to be among the asset bubbles with the largest effect on the real economy, because they are credit-fueled, because a large number of households participate and not just investors, and because the wealth effect from housing tends to be larger than for other types of financial assets.
A real-estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom. A land boom is a rapid increase in the market price of real property such as housing until they reach unsustainable levels and then declines. This period, during the run-up to the crash, is also known as froth. The questions of whether real estate bubbles can be identified and prevented, and whether they have broader macroeconomic significance, are answered differently by schools of economic thought, as detailed below.
Capitalization rate is a real estate valuation measure used to compare different real estate investments. Although there are many variations, the cap rate is generally calculated as the ratio between the annual rental income produced by a real estate asset to its current market value. Most variations depend on the definition of the annual rental income and whether it is gross or net of annual costs, and whether the annual rental income is the actual amount received, or the potential rental income that could be received if the asset was optimally rented.
Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and a number of forms that exist along a continuum – from emergency homeless shelters, to transitional housing, to non-market rental, to formal and informal rental, indigenous housing, and ending with affordable home ownership.
The Spanish property bubble is the collapsed overshooting part of a long-term price increase of Spanish real estate prices. This long-term price increase has happened in various stages from 1985 up to 2008. The housing bubble can be clearly divided in three periods: 1985–1991, in which the price nearly tripled; 1992–1996, in which the price remained somewhat stable; and 1996–2008, in which prices grew astonishingly again. Coinciding with the financial crisis of 2007–08, prices began to fall. In 2013, Raj Badiani, an economist at IHS Global Insight in London, estimated that the value of residential real estate has dropped more than 30 percent since 2007 and that house prices would fall at least 50 percent from the peak by 2015. Alcidi and Gros note; “If construction were to continue at the still relatively high rate of today, the process of absorption of the bubble would take more than 30 years”.
During the Danish property bubble of 2001 through 2006, Danish property prices rose faster than at any point in history, in some years increasing by more than 25%. Apartments and homes near the big cities rose especially fast.
Ever since the 1997 Asian financial crisis, property markets have greatly developed through the years. Asian governments have improved the financial stance associated with the structure of housing finance, allowing more access to a diverse range of mortgages products.
The Australian property market comprises the trade of land and its permanent fixtures located within Australia. The average Australian property price grew 0.5% per year from 1890 to 1990 after inflation, however rose from 1990 to 2017 at a faster rate and may be showing signs of a contracting economic bubble. House prices in Australia receive considerable attention from the media and the Reserve Bank and some commentators have argued that there is an Australian property bubble.
The Australian property bubble is the economic theory that the Australian property market has become or is becoming significantly overpriced and due for a significant downturn. Since the early 2010s, various commentators, including one Treasury official, have claimed the Australian property market is in a significant bubble.
The 2005 Chinese property bubble was a real estate bubble in residential and commercial real estate in China. The New York Times reported that the bubble started to deflate in 2011, while observing increased complaints that members of the middle-class were unable to afford homes in large cities. The deflation of the property bubble is seen as one of the primary causes for China's declining economic growth in 2013.
The Lebanese housing bubble refers to an economic bubble affecting almost all of the Lebanese real estate sector, whereby property prices have risen exponentially since 2005, while the GDP has risen only around 52% during that same period.
Real estate in China is developed and managed by public, private, and state-owned red chip enterprises.
Affordable housing in Canada is housing that is deemed affordable to those with a median household income in Canada.
The Baltic states' housing bubble was an economic bubble involving major cities in Estonia, Latvia and Lithuania. The three Baltic countries had enjoyed a relatively strong economic growth between 2000 and 2006, and the real estate sectors had performed well since 2000. In fact, in between 2005Q1 and 2007Q1, the official house price index for Estonia, Latvia and Lithuania recorded a sharp jump of 104.6%, 134.3% and 106.7%. By comparison, the official house price index for Euro Area increased by 11.8% for a similar time period.
Real estate in Panama is about how the Republic of Panama's real estate industry has grown since 2006, as foreign investments helped to fuel Panama's economy and housing market.
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, buildings or housing in general. In terms of law, real is in relation to land property and is different from personal property while estate means the "interest" a person has in that land property.
The property bubble in New Zealand is a major national economic and social issue. Since the early 1990s, house prices in New Zealand have risen considerably faster than incomes, putting increasing pressure on public housing providers as fewer households have access to housing on the private market. The property bubble has produced significant impacts on inequality in New Zealand, which now has one of the highest homelessness rate in the OECD and a record-high waiting list for public housing. Government policies have attempted to address the crisis since 2013, but have produced limited impacts to reduce prices or increase the supply of affordable housing. However, prices started falling in 2022 in response to tightening of mortgage availability and supply increasing. Some areas saw drops as high as around 9% - albeit from very high prices.
The Canadian property bubble refers to a significant rise in Canadian real estate prices from 2002 to present which some observers have called a real estate bubble. From 2003 to 2018, Canada saw an increase in home and property prices of up to 337% in some cities. By 2018, home-owning costs were above 1990 levels when Canada saw its last housing bubble burst. Bloomberg Economics ranks Canada as the second largest housing bubble across the OECD in 2019 and 2021. Starting in February 2022, prices started to decline rapidly as the Bank of Canada hiked interest rates culminating in detached prices to decline by $400,000 in the Greater Toronto Area by September of 2022.
