How does it compare the US collapse in 08? How do the causes& impacts compare?
In: Economics
Similar to ’08 in that housing was used as a speculative investment and a bubble burst. Different in that, in the US, it was banks giving loans to first-time home-buyers who couldn’t pay them, with rates that were destined to become unpayable after a few years. It was a lot of weird, sort of hard to understand financial bullshit going on with banks making risky investments and lots of other investments being tied into those.
In china, I believe it was simpler – a whole generation was middle class for the first time, and a natural housing boom went beyond natural demand and became an investment bubble. People were buying 2nd & 3rd homes as investments, essentially on pre-order years ahead. Companies were building tons of developments on credit, assuming there’d always be buyers. Eventually, people realized that the prices didn’t reflect real demand, their value as an investment crashed, and there was suddenly no new money coming in to pay for the 10 half-built projects that every company had in progress. Companies go bankrupt, apartments sit unfinished, people never get the units they pre-paid for.
Latest Answers