By Dan Prescher
According to a report by McKinsey Quarterly, when the U.S. housing market bubble burst in 2008, the average value of residential real estate fell 10 percent.
This drop amounts to $3.4 trillion dollars in homeowner wealth that simply evaporated into thin air when the housing market bubble popped. And because housing prices are slow to correct, the bottom of the market may still be far off.
The global housing market bubble popped as well, but outside the U.S. the average decline in value was only four percent. And according to the report, emerging markets are weathering the storm fairly well because their growth fundamentals remain strong.
This will probably lead to increased global influence and larger shares of world capital for emerging markets where the current crisis is just a temporary interruption of development.
“Brazil is the best example of this ‘emerging market’ effect that I can think of,” says Ronan McMahon of Pathfinder Real Estate, a global property research and marketing firm. “Brazil is now mentioned in the same breath as China, India, and Russia as new global financial powers. Brazil has immense natural resources, a progressive government, and relatively few ties to U.S. financial entanglements to drag it down.
“That’s one reason I’ve been so bullish on Brazilian real estate for the past few years,” says McMahon. “It’s a prime example of a market that has everything going for it to maintain and increase value even the face of the global downturn.”