An overheated housing market creates another danger: apartments can become cheaper due to lower demand for mortgages. And this would seem to be a good thing, but borrowers can find themselves in a dead end. Prime writes about this.
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If the loan is not repaid, the bank will take away the housing, but the debt will not be repaid, said Alexey Krichevsky, an expert and author of the educational project “Economism”.
Property prices have been falling for several months and negotiating now when buying can easily “waste” up to 10%. This made the situation for sellers, who were extremely speculative and had borrowed funds, very dangerous.
There is a scenario in which the owner may be left without the property and with debts.
“It may turn out that someone paid off the loan for several years and then decided to sell the property. And it turned out that they seemed to have sold it, but they still owed money,” says a real estate expert.
The new construction segment cannot avoid this either, because any resale of a residential building is already a secondary sale. And such real estate is 30-40% cheaper than new buildings.
The expert says that one could say there is no way out. Apartments will lose value as the mortgage deflates. There is demand for rentals, but even there the market may soon become oversaturated and landlords will have to make concessions. Renting may not be profitable, because taxes and depreciation are not a cheap expense. It is also not profitable, especially considering taxes and depreciation.
Krichevsky believes that we should soon expect precedents to emerge when the bank takes the property and, in exchange, restores the mortgage loan. Stories like this will surely appear.
We previously wrote that banks began identifying borrowers who had taken out more than one prime mortgage and raising the rates on their loans.
Author:
Nikolai Tikhonov
Source: RB
I am a professional journalist and content creator with extensive experience writing for news websites. I currently work as an author at Gadget Onus, where I specialize in covering hot news topics. My written pieces have been published on some of the biggest media outlets around the world, including The Guardian and BBC News.
