Dear  colleague, the chapter titles are similar, but the content of each chapter is different. Following the bursting of the real-estate bubble, and the fall in value of real-estate property, the subprime crisis has brought with it extremely attractive real-estate prices. We as international real-estate entrepreneurs today identify exceptional investment opportunities at this point in time for purchasing properties, promoting projects and real-estate investments.

The financial crisis in America is composed of a number of factors, one of the principle ones being over leveraging by populations defined as weak (the private sector). Other factors include people having low credit rating, and poor ability to pay money back. In addition, there are the debtors, a group of businesses including private debtors and companies who over recent years have raised capital from numerous financial sources to finance the purchase of real-estate on the basis of limited equity capital and extremely low cost of raising funds (cheap money). Business groups designated the leveraged money for real-estate investments in their own countries and abroad at exceedingly high financial leverage.

The debt acquired by companies, some of them with little equity capital for transactions that did not always give the high yields expected, and mortgage loans at particularly low interest which pushed the enterprisers to ambitious mega projects combined with income generating real-estate and interest games culminated in the real-estate bubble. There then followed a fall in the value of real-estate property, high inflation which was the silent enemy - and then a state of insolvency on the part of the debtors, companies and individuals who purchased real-estate: houses, villas, buildings. From here we reached a property curve and damage to the banks; the banks were no longer able to give credit (the credit crunch). The sale of property that took place in conditions which you could call an unprecedented recession led to the bursting of the real-estate bubble.

equity-capital-transactions

Following this, investment banks fell and became nationalized. Then the private debtors who lost their properties were hurt as were real-estate companies and bodies. There is no doubt that the world financial systems including that of the United States are still turbulent; the banks have taken a hard stance on giving credit to debtors.

For the sake of example, we will take the United States where in the private market, each person has a credit rating fluctuating between 500-850; those who possess less credit than 600 or even 700 are defined as problematic while those with over 800 points are considered very good.

In fact, non-American investors do not have credit rating; therefore loans for private properties are very expensive at 7% for 30 years at fixed interest, fluctuating depending on the investor. Interest is high for people with low credit rating such as private debtors who today are also committed to high equity capital and of course the ability to pay back loans (policy change).

A sharp drop in public savings and spend thrifty lifestyles are another facet of the declining situation. Individuals easily buying real-estate at banks that failed to carry out in-depth checks caused a new rise in property prices.

The S&P/Case-Schiller Composite 20 City Price Index that measures changes in 20 of the biggest American cities sites an average drop of 20% from the peak price.

{rsform 6}

Gabi Mor, CEO
Gold Club Investments
Web:     www.goldclub-investments.com 
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it  
Address: 278, Dizengoff St. Tel-Aviv, Israel
Mobile: 972-50-8750827
Home: +972-776550039
Office: +972-5774465

< Prev   Next >