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What are The Effects of Financial Crisis on Real Estate Markets?

Financial crisis is a situation where there is a rapid loss in value of large part of financial institutions or assets. There are many related terms which are used interchangeably such as recession, stock exchange crash, bubble burst. Each time there is a financial crisis the conditions and severity are different and so are the causes. Every financial crisis is triggered by some causes, the most recent one being in 2008-09, affecting U.S. and many other countries. The sub prime mortgage crisis and real estate markets bubble burst are believed to be the main culprit of this disaster.

The effects of financial crisis have been felt greatly by the different sectors in the real estate market. The financial crisis marked the end of the very high valuations of the real estate markets and sudden decrease in prices. It created havoc in the market by spelling doom for the investors who have put their money in high valued real estates because the investors not only lose the money invested in the real estate market but also the money borrowed against it amounts to bad loans. The huge number of foreclosed homes is just one of the many sad effects of the financial crisis in the real estate market. The effects of this financial crisis have been very real after the big banks and real estate firms started reducing their operation and filling for bankruptcy. This finally led to lose of million jobs throughout the world.

There are other effects as well. There is a prediction of decrease in rents up to twenty percent and increase in office vacancies up to 5 to 7 percent due to companies going bankrupt or being acquired. As is the case in every other market a financial crisis also provides a new opportunity to the new investors and offers a level field for them. Also the consumers get fabulous offers as high valued property at prime location is up for sale at very low rates.

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