Research (Investicniweb.cz)
Markets  |  November 15, 2012 08:10:31

Where new housing bubble inflated in Europe?



Icelandic lawmakers looking for ways to prevent further inflating speculative bubbles. Foreign investors are driven by the influence of capital regulation to invest such funds into Icelandic assets. The most attractive is their real estate market.

Housing prices have gone up by Iceland in April 2010 by 17%, according to the local statistical office only 1.7% below the pre-crisis peak of March 2008.The causes of the boom can be found in monetary restrictions that have been imposed on foreign investors in 2008, the government prevented the collapse of the krona after the bankruptcy of the largest local bank.

Although regulations have helped defuse the outflow of capital and stimulate recovery, she believes the IMF or, for example Nobel laureate Paul Krugman, leaving behind eight billion Icelandic crowns in the hands of foreign investors, which may result only in Icelandic assets. Risk that Iceland inflate another bubble, rising, and only four years after the banking industry got the economy into its worst recession since World War II.

Can be controlled to prevent another bubble?

The Government is now considering how it could remedy the imbalance. Considering whether to approve a law restricting investment opportunities for foreign investors. The funds would not be pumped into the real estate market.

Capital controls and the decision to let banks go bankrupt helped kick-start economic recovery after the crisis that triggered the recession continued into the first quarter of 2010. According to estimates by the Icelandic Central Bank of Iceland this year, GDP growth of 3.1% and next year by 2.2%. Icelandic krona lost in October 2008 against the euro, 80% of its value, and Iceland was forced to ask the IMF for a bailout package to avoid state bankruptcy.

Great credit rating agencies but warn that it is capital controls pose the greatest threat to Iceland's recovery. The central bank estimates that will remain in effect until 2015.This is confirmed by the statements of financial Katrin Juliusdóttirové Minister, who said that Iceland maintain monetary control, until the country did not join the euro area. Accession talks, which began in 2010, are far from over.

"Capital regulation created an abnormal situation and evoke feeling better about the economy than it really is. Was created artificial world of the krona, the currency that is not fair," says Sigridur Ingibjörg Ingadóttirová, head of the Parliamentary Social Committee. "We push the Icelandic crown up laws that protect it."

What may have knocked Icelandic real estate bubble and the danger of falling mortgage Icelandic state institutions can be found on the web Investment?



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