The prices to rent or buy apartments here are really cheap compared to prices in Helsinki, which are for me the best reference. 53.000 Eur for 70 square meters in Valencia, also there are apartments for rent and sale wherever you go. I just did a quick search and the cheapest apartment I could find for sale in Helsinki with 70 square meters is 159 000 Euros; even though I am not sure the cities are comparable.
Here's a text I wrote for an assignment on the Spanish mortgage and property crises in the autumn because I wanted to understand it better.
Spain’s mortgage and property crisis had a lot of
causes that blended all together to hit the country hard. The beginning to the property crisis for
Spain could have been the entry into the Euro-zone that lowered interest rates
and increased the demand in the real-estate sector, which in turn increased
inflation (Shachmurove and Shachmurove, 2011, p. 14). However, another reason
can be traced back to the 70’s and the deregulation of the banking system and
tax-regulations in Spain that encouraged ownership of houses instead of renting.
(Hill & Myatt, 2010, p. 259-260; Shachmurove and Shachmurove, 2011, p. 14).
As the property owning was encouraged, Spain had one
largest number of mortgages per capita. However, as the construction sector
drove the country’s economic growth, companies kept on building which
eventually hit a turn with the bubble burst (Daley and Minder, 2010). One of
the banking policies that were utilized was long loans, up to 40 years or more
(Shachmurove and Shachmurove, 2011, p. 12), and additionally, the loans were
sub-primed or primed, sold off as securitized mortgages to financial companies
(Landon and Minder, 2012). Now, homeowners are stuck with the loans, which they
probably never can repay, or have to consider selling the houses but losing 40-50
percent of equity (Chakrabortty, 2011). Banks in turn are trying to get rid of
the property rights in their Balance Sheet with big discounts and special
mortgage rates. (Daley and Minder, 2010).
As previously stated, some argue that the bubble could
have been avoided without the change from pesetas to Euro. Krugman (2010) argue
that if Spain still had pesetas they could easily solve their economic problem
now with devaluation of the currency. However, another reason was probably the deregulation
that pushed growth but destabilized the global market (Hill & Myatt, 2010,
p. 261-263).
So what could have been done differently and what sort
of regulations could have been put in place? These are my own reflections:
banks could have had better background checks on who they loaned to and
stricter evaluation of properties and land. Government could have had stronger
regulation on urban planning, not to build too much, and encourage renting as
well as purchasing. They could also have pushed for stronger transparency and
better reporting from banks. The people taking loans should perhaps have been
informed better on the risks of long loans and the benefits with renting. There
could probably have been actions taken towards corruption as well, however,
this measure should be taken from an institution that is not already involved
in politics in Spain.
Sources:
Chakrabortty Aditya, 2011, Nightmare for residents trapped in Spanish
ghost towns, The Guardian, retrieved 29.9.2012 from http://www.guardian.co.uk/world/2011/mar/28/residents-trapped-spanish-ghost-towns
Daley Suzanne and Minder Raphael, 2010, Newly Built Ghost Towns Haunts
Banks in Spain, New York Times, retrieved
29.9.2012 from: http://www.nytimes.com/2010/12/18/world/europe/18spain.html?pagewanted=1&_r=1&partner=rss&emc=rss
Hill Rod & Myatt Tony, The Economics Anti-Textbook-A Critical
Thinker’s Guide to Micro-Economics, Fernwood
Publishing and Zed Books
Landon Thomas and Minder Raphael, 2012, Cost of Spain’s Housing Bust
Could Force a Bailout, The New York
Times, retrieved 29.9.2012 from http://www.nytimes.com/2012/04/25/business/global/cost-of-spains-housing-bust-could-force-a-bailout.html?pagewanted=all&_moc.semityn.www&_r=0
Shachmurove Tomer and Shachmurove Yochanan, 2011, String of Defaults:
Spanish Financial Crises through the Years, Aestimatio,
The IEB International Journal of Finance, 2011. 2:2-21
You can go back to look at the video I posted before on the crises of credit and how sub-prime loans work if that's a new concept to you. And as we are on the subject of banks I still want to post a video with Ben Dyson and Andrew Jackson from Positive Money and their view on what is wrong with the banking system.
A forex trading broker would always claim that it's important to invest on something that man might see a potential use in. Going green is a movement that is very helpful in the society and I guess it's a wise move to invest on it.
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