Pay back time
It's funny how when people were borrowing endlessly, nobody was worried. Mortgage equity withdrawal has been increasing for years before the bubble burst. Few analysts were worried about this - it was a new era when money would be forever cheap and plenty.
Now, customers don't like the idea of paying 7% interest when the Bank of England has dropped its own rates to record lows, and have started the painful process of clearing the debt. If we are to return to stability, this may take years. Unless of course inflation kicks in to reduce the value of this debt. Paying back the debt means less spending, and of course this has the analysts disturbed about the effects on the real economy.
The graph from The T elegraph tells part of the story.
This would suggest things may soon be back to equilibrium.
What it doesn't say is that these positive bars in 2007 stretch back almost a decade (from The Economics Blog):
House prices
The BBC is showing us the above graph.
It definately looks like the last two months are a bit better than the ones before them.
This could go three ways... A long slide with a little pause in the middle; a V shaped; or a U shaped graph.
Either way, things are changing in the marketplace and it's now the time to start looking closely again.
The comparison to the Asian Financial Crisis
Singapore's real estate market went down 80% in the wake of the Asian Financial Crisis, and that city is still there as well.
The recent article on AMEInfo compares Dubai with Singapore at the beginning of the Asia financial crisis, and suggests that the current talk of Dubai's troubles is hype - just like the talk of Dubai's boom a year ago.
There's certainly a lot of truth in this comparison. Indeed the Asian Financial Crisis saw property devaluations in most of the commerce centres of the region. The Hong Kong is a classic case study and one that can be used to discuss Dubai.
On the more positive side, Dubai has positioned itself not only as a financial centre but also as a tourism one. Little comfort while tourism is as hard hit as finance, but we could expect some recovery in tourism faster, once consumer sentiment grows.
The negative view is that the current crisis is more global and may take longer to resolve. Those Asian countries were also not that reliant on expats who can get up and leave when the crisis hits.