Most of us think that investing in real estate is the safest thing, as it guarantees a profitable earnings in compare to investing in gold or dollar. But, there is a common term nowadays which is the real estate bubble. So, what is real estate bubble and its relationship with the whole economy of the state?
Real estate bubble or economic bubble is a term that refers to the “demand” increment concerning properties which push the investors to invest in real estate which guarantee a good profit.
Of course, there is a tight relation, as because of the constant demand for properties and as a result of the high prices in everything, the prices of properties will be increased also and the owners will make use of such increment in “demand” and the buyers’ need, so they increase the price of the properties.
Also, it is expected that because of the constant incredible increment of properties’ price that the buyer cannot afford, a “real estate recession” may occur. This is known by the increment in “supply”. But, on the contrary, the purchasing rates decrease as the buyers are not able to afford such incredible prices. This is the “economic recession”.
As a result, the owners are forced to decrease the properties’ prices in order to avoid loss. But, what actually happens is that the buyers are not able to buy because of the bubble.
To avoid entering such real estate bubble and the recession in general, the state shall legislate laws concerning the greedy owners, and also build the awareness of the citizen to be able to evaluate the property to avoid fraud.