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The main financial regulator in the UK, The Financial Services Authority (FSA),
is warning that the impact of the market gone mad credit crunch, could be worse than expected, reporting that there has been a huge increase in the number of properties being offered under the auctioneers hammer.
This is considered an indication of more repossessions as people are defaulting on their mortgage payments, and a last effort of desperation to sell.
Figures from the Council of Mortgage Lenders (CML), found that repossessions soared to 18,900 in the first six months of 2008, up 5,500 from 13,400 in the last six months of 2007, the highest level of repossessions in more than a decade in the UK.
And figures from EI Group (The Essential Information Group) show that the number of properties on offer at auction has soared by almost 300% over the last three years.
Europe has seen no serious crash.
Real estate has been responsible for some of the dramatic changes in Europe over the past ten years. Huge investments in coastal areas, have turned Spain into the property-boom capital of the Continent, while sleepless development has also helped transform London into a city of gleaming, state-of-the-art office towers.
Investors have also bought up vast tracts of public housing from German cities eager to fill empty properties. And they have financed offices and shopping centers that cater to the growing economies of Central and Eastern Europe.
And luckily, Europe has seen no serious crash.
With property values falling in vast parts of the US, Europe looks like a model of fiscal sobriety. Economists said the rising cost of credit and tougher regulation might have prevented the Continent from reaching a crisis phase.
Still, values are stagnating in places like Spain, and home foreclosures are rising in Britain.
Italy
Italian property company Aedes admitted its “unstable financial position” on Friday as it reported it’s financials for the first-half of this year and showing a net loss of 49.3 million euros ($74.77 million) in a real estate market it said had slumped.
Italy's property sector is suffering like other countries caught up in the ripple effect (some would say a tsunami!), of a crisis in U.S. sub-prime mortgage lending.
In its statement, Aedes said that the domestic real estate market had slowed to a point that prevented them from selling off assets.
Even when the credit squeeze relaxes, probably early to mid 2009, the property market, with its hefty borrowing dependency, will face a fundamental change. Historically low interest rates, maintained by the central banks in the U S and Europe for much of the past decade, are gone, and may not return anytime soon.
JPMorgan’s Nick Tyrrell, the head of research and strategy for European real estate at the Asset Management's office in London, said investors will want to ‘vaccinate their portfolios’ by investing into markets that are less prone to a downturn. He pointed to Vienna, Amsterdam, and steadily growing Germany as three such destinations.
The trend probably means bad news for Britain and Spain, two blockbuster markets in the recent past, Tyrrell also said the perception is that they are now overpriced.
And now the good news.
It is predicted that once the economic outlook improves in the UK property will resume its previous upward trend.
The optimism comes from The National Housing Federation claims it is excited about the future and highlights that in some parts of the country, the property market is not in a downward spiral, however it didn’t say it continued to increase either.
Analysts say that far from falling off the proverbial cliff, house prices could actually increase by a quarter by 2013. It’s report predicts that prices will continue to fall in 2009, make a recovery in 2010 and then make a rapid increase from 2011.
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