Dynamics
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Generational Dynamics |
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A study by investment bankers Morgan Stanley warns that the bubble will burst with devastating results.
Residential properties in countries around the world, including America, Australia, the United Kingdom, China, South Korea, Spain, the Netherlands, and South Africa, are overpriced by 50% or more.
The cause is clear, according to Stephen Roach, chief economist of Morgan Stanley. The stock market bubble of the late 1990s caused the Fed to lower interest rates to historic lows, and the same happened in central banks around the world. With interest rates low, excess liquidity flowed into the housing market.
"Courtesy of property-induced wealth effects, the global economy was neatly able to sidestep the potentially devastating aftershocks of the [late 1990s] burst equity bubble," says Roach. He adds that as interest rates continue to rise and the global property bubble finally bursts, there will be no secret weapon for the global economy to turn to this time.
What this means for you personally is this: If you own, or you're thinking of buying, residential property, then you should be aware that the market value of that property may fall by 30-50% in the next few years.
Since 2002, we've been pointing out that Generational Dynamics
predicts that we're entering a new 1930s style Great Depression, and
that stock prices will fall by 50% in the next few years. The Fed's
low interest policy has postponed the effects of the Nasdaq crash of
2000, but has not eliminated them.
(30-Jul-04)
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