The real estate bubble, its reasons and ways to avoid it

It’s natural for real estate prices to change globally between rising and decreasing, but sometimes the prices rise suddenly and reach unreasonable numbers, then they suddenly drop, and this is what is known as the real estate bubble.

What is the real estate bubble?

Real estate bubble means the occurrence of sudden unreasonable price increase of properties, but it soon decreases gradually or suddenly, the real estate bubble starts with the increase of real estate demand that is higher than the listed properties, which make the prices of the listed properties significantly rise.

Why the real estate bubble is dangerous?

The real estate bubble is followed by the entrance of speculators to the market and their purchase of many apartments to sell them later, then the prices rise to unreasonable levels, this leads to a sharp drop in prices, and then the real estate bubble burst, this bubble would be the reason in bankruptcy of many investors and real estate owners in the region it forms in, and its effects would get up to making damage to the Turkish economy .

What are the reasons of the real estate bubble?

The real estate bubble does not come out of nowhere, there are prior reasons that you can use as indicators to predict the real estate bubble which are:

1. Economic prosperity and increased demand for ownership:

As the rise in general economic activity in the country and the increase in prosperity among the population encourages the ownership of homes and real estate in order to preserve them, and thus crowd out those who need them.

2. Entering a new demographic layer to the real estate market in a way that exceeds the ability of the real estate market to absorb it.

3. Loose mortgage criteria: Which facilitate obtaining mortgage which makes ownership easy.

4. Creative ways of marketing and selling real estate products.

5. Speculative behavior by market makers of investors and large real estate builders.

6. Domestic and global inflation: as the property including land and construction material, and the rise in the price of any of them will naturally lead to the rise of property prices.

7. Announcing plans for major projects in some areas: which leads to increases in real estate prices due to the demand for that area.

Signs that indicate the real estate bubble:

Some of the signs that indicates that this type of bubbles is approaching:

1. The increase in real estate prices, which makes home ownership out of reach of more buyers.

2. The occurrence of cases of unacceptable and unrealistic price inflation, and this matter coincides with the case of mass intrusion into buying for quite some time.

3. It might be noticeable the exit of major investors in this sector with their profits, which they collected before the bursting of this bubble or with its beginnings.

When does the real estate bubble bursts?

The bubble finally bursts when the concept of excessive and risky pricing spreads, at a time when real estate prices no longer reflect the real price of it.

In the real estate market, a real estate bubble occurs when builders continue to build in response to the increasing demand, which has recently begun to contradict clearly, so demand decreases while supply increases, so the inevitable results are a slowdown in sales and a decrease in price increases.

Disadvantages of the real estate bubble:

When the real estate bubble bursts, speculation is rampant and many economic damages occur, which leads to a collapse in real estate prices, in addition to the failure of borrowers to pay it, because it naturally exceeds the market value of their properties.

This leads to negative consequences most important of which:

1. Bankruptcy.

2. Low chances of obtaining suitable housing.

3. Significant decline in economic activity in the country.

How to avoid investing in the real estate bubble period:

You can look at the matter from two angles, if you wish to sell your property or you are interested in purchasing a property in Turkey .

1. The first angle: If you own a property in an area that is witnessing a rise in real estate prices, not doubt you will be interested in selling your property benefiting from its high price today and its profit for purchasing its counterpart in the same time for a lower price, but be careful from losing the benefit of selling, since if you don’t have a plan to move to a lower-cost area or you can reserve this amount, then you’re actually jumping right at the center of the bubble.

2. The second angle: If you’re looking for a property to purchase, we advise you to think in postponing this step for some time because you might end up paying high amounts of money in a market that is witnessing inflation.

Can what is happening in the Turkish real estate market be considered a real estate bubble?

Real estate prices in Turkey has witnessed a big increase during the last few years, the reason behind that in fact is the delay in construction operations which led to increase in demand and decrease in supply.

Looking at the real estate bubble reasons we mentioned above we can say: this price increases were mostly of natural origin, as real estate market in Turkey is actually a dynamic market, and the increasing demand for real estate originally due to an urgent need to meet the continuous and growing internal demand of more than 85 million people.

Europ Homes Real Estate Advice for Those Willing to Purchase Real Estate in Turkey:

We advise you when you want to buy a property with more caution and not to miss the advice of the real estate experts in our company, because our high expertise of our team will allow you to know a lot of information and advice to make a decision to Owning real estate in Turkey .