case real estate market

7/26/2019 Case Real Estate Market

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Case


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What lesson should kazakhstanlearn from the collapse of the

real estate market?


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Background of HousingBubbles

Rapid growth in Kazakhstans G! started fromthe "ear of #$$$

Construction business started to do ma%or

de&elopment pro%ects o'ce space( lu)ur"housing and resorts

!re&iousl"( people had to pa" in cash

*ntroduction of mortgages with eas" terms people could purchase more e)pensi&eproperties and paid it o&er #$ "ears


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Background of HousingBubbles

!roperties prices went doubled and went up all the wa" andreached the peak in #$$+

Wages could not %ustif" the high mortgages

Housing bubble burst housing prices dropped ,$- from its peak

Construction de&elopers unsold and unsellable apartments

Bu"er of propertiesun.nished properties because thede&elopers do not ha&e funds to complete the pro%ects

/ortgage borrower their properties worth half of what the" owe

to banks( unable to sell the properties enough to escape their debt

efault rate on mortgages has been growing


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Causes of Housing BubbleBanks had been o0ering loan to businesses that

were in&esting in grandiose pro%ects andindi&iduals who were straining themsel&es onmortgages and on personal consumption credit

Banks lend most of their deposits rather thanlending at a one1to1one ratio 234 in loans perdollar of deposits5hea&il" e)posed to an"

downturn in the econom"


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Causes of Housing Bubble/ortgage s"stem no down pa"ment( lower

pa"ment in earl" "ears( higher pa"mentscoming later (Predatory Lending)

Banks lacked e)perience in commercial lendingand people had no credit histor" banks haddi'cult" discerning good risks from bad


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Causes of Housing BubbleBanks granted mortgage loan to man" people

6oo1eas"1loan lead the properties prices bubbledup prices are too high and become

una0ordable

burst

7ide e0ect8 collapses of banks


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9esson 9earnedBanks should ha&e a good risk management(

especiall" pre&ent great e)posure of credit risk

Bank should be selecti&e and a&oid predator"

lending


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:n a&erage( how long does it takefor goods to be shipped fromChina to ;urope and how will thenew route cut this time?


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Suez Canal Bei%ings 2China5 current reliance onshipping e)ports to ;urope is &ia the 7uez Canal Central sia( and China >Kazakhstan > Russia > Western ;urope< :nl" 4$da"s


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How is Kazakhstan intending to raisethe funds for the massi&e e)pansionand modernization program of its

railwa" infrastructure?


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4< Kazakh 6emir @hol"( the national railwa"operator( will be raising its freight tarisb"4= percent per "ear between #$$A and #$4#to raise around 3=


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How does Kazakhstan intend to continue to

forge relations with countries such as thenited rab ;mirates and Gulf 7tates ingeneral for their mutual bene.t?


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Based on understanding and achie&ing of %ointinterests

Continuous e)change of o'cial &isits

!ro%ects

Kazakhstan is rich in natural resources( whileGulf 7tates alread" ha&e the knowledge and

e)pertise in learning to e)ploit Kazakhstancommodities

case real estate market

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