What does 'Property Bubble' mean when buying a property?

Find out what Property Bubble means when you are buying a property. 'What does Property Bubble mean?' plus over 150 other property related terms and jargon in plain English

Property Bubble

A property bubble occurs when property prices rise to an unsustainable level. When they drop back down the "bubble has burst". Note a bubble only occurs when the above happens in isolation from other factors - e.g. there is no major recession on the overall economy.

In the lead up to the Credit Crisis of 2008 a Property Bubble caused a recession. Too many people were given mortgages they would not be able to pay back which drove up the price of properties. When those people stopped paying their mortgages the bubble burst and the values of the properties dropped to previous levels.

However because global economies were so tied into the higher property values this lead to a wider recession which then drove property prices lower.

As such there has never actually been a property bubble in the UK as value drops only occurred when the wider economy goes into recession. This includes 2008/2009 when prices dropped because of a recession, not a bubble.

This compares with the dot-com bubble which burst even though the rest of the economy (and house prices) continued to grow.

To find out more about how you can work out what is going on with property prices pick up a copy of my ebook How to Really Buy a Property.

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How to Really Buy a Property

"... predictions for the property market (and who doesn't); How the market works over the short term and the long term; The difference between property bubbles and property booms; Why it can be a good idea to buy when prices are falling; The principles of buying a property to let and what the..."

"... on the World Trade Centre in 2001, the war in Iraq in 2003 and the Credit Crunch of 2008. For more information on this is and how it affects the market see Chapter 6: property bubbles and Market Crashes..."

"... to market busts; What the UK property market follows; The role of confidence and capitalism in the property markets; Why the UK has never had a property bubble; When the figures cannot be trusted; Understanding the statistics; How demand can fall but prices remain static. In..."
"... In many countries, including the UK, protecting property prices from large falls was part of that plan and a political necessity. - property bubbles - Bubbles are often confused with booms and crucially property booms are often misreported as property bubbles. For a property bubble..."
"... from large falls was part of that plan and a political necessity. - property bubbles - Bubbles are often confused with booms and crucially property booms are often misreported as property bubbles. For a property bubble to occur real estate must be over valued by the market in isolation...."
"... as property bubbles. For a property bubble to occur real estate must be over valued by the market in isolation. If, in 2008, the economy had continued to grow but house prices had started to drop then it could be said that there had been a property bubble. A perfect example of a real..."
"... on the rest of the economy. On it's own it can sensibly be called a bubble. Understand the difference between a boom and a bubble and you realize that there has never actually been a property bubble in the UK. The early nineties saw houses prices fall as the economy moved into recession..."
"... is not to say the property bubble concept isn't valid and it does occur. Ireland was a striking example where prices moved up ever higher from the turn of the millennium. The collapse in values, over 50% from their peak, was far greater than the general recession of the country or any reduction in GDP. The business cycle had moved to the bust phases but real estate was much more than just bust, it was a burst..."
"... and busts are different from bubbles and bursts but they are often mixed up by the media. In Britain there has never been a true property bubble which burst on a national scale but it has happened locally. Instead property prices follow the booms and busts of the business cycle and a way to predict this accurately has yet to be..."

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