Soccer is a popular hobby in Chile besides the well-known asado. It was the Chilean real estate market that received a yellow card most recently, not the well-known Universidad de Chile or Colo-Colo squads.
Chilean Central Bank President Rodrigo Vergara told the Senate that price increases that began earlier this year had expanded and intensified. A real estate bubble hasn't formed, but despite this, the Central Bank has grown increasingly concerned about the sector and its potential impact on the financial sector due to growing indebtedness among real estate companies, increased credit availability, a potential for real estate investment in the medium term, and other factors. LTV ratios have reportedly grown from 79% in July 2011 to 86% in July 2012, even though the percentage of bank credit portfolios with delinquent loans has dropped. cheap rental cars
There's a lot of discussion about whether or not the real estate market is too hot. According to other participants in the real estate business, Chile's ongoing economic expansion and rising land costs are mostly to blame for the country's rapid price hikes. Financier Felipe Larrain of Chile's Ministry of Finance asserted that the country's rapid price hikes were mostly driven by rising purchasing power and disposable income due to Chile's sustained economic growth and rising land costs. Many other real estate market participants agreed. The GDP of Chile is predicted to grow by 5.5% in 2012. Speculative real estate investment, lending volumes as a percentage of GDP, and banking credit procedures have all remained conservative, according to industry participants.
Since the macroeconomic profile of the country has improved to a degree that has never before been seen, potential demand for Chile's core exports continues to grow, the middle class expands, and inflation remains largely under control, making it difficult to assess the country's real estate sector risk. This new qualitative and quantitative growth landscape in Chile's economy makes it difficult to set long-term price and debt targets that are both attainable.
In the event of a downturn, credit-financed speculation will be less of a threat to the sector than the potential of an economic downturn. The mining boom, spurred in part by imports from China, has accounted for a substantial proportion of the residential sector's rise even as Chile's economy has continued to diversify. If Chinese demand declines and energy and labor expenses rise, mining companies' profit margins could be wiped out, resulting in mass layoffs, especially in northern Chile, where the mining industry is highly dependent.
Despite its low debt levels, Chile's financial industry lacks a well-developed secondary lending market. Overall debt levels have been kept low, but banks' capacity to structure and disperse credit risk has been limited. A rise in the level of bank or systemic financial risk means that banks are more likely to stop lending, causing liquidity levels to fall more rapidly. This could further worsen the effects of a prospective economic slump by further reducing the availability of affordable housing.