Real estate speculation is defined as the buying or development of real estate at a price well below market value. The real estate is then resold by the proprietor, in most cases, but also occasionally by a real estate developer or broker, or simply by an individual. In this way, actors can expect large profits.
Real estate bubbles occur when prices on the real estate market skyrocket. The real estate market consists in reality of several sub-markets; each of these sub-markets has its own distinct characteristics, notably in terms of the elasticity of supply (the number of actors prepared to sell their property if prices go up) and demand. The likelihood that real estate speculation will occur increases significantly when the competitive situation is imperfect or impure. Indeed, if public contracts, building permits, and building lots are handled without transparency, there is a greater risk that speculation will occur.
Real estate speculation is often made easier by lax public authorities, who do not require proprietors to refurbish their properties in order to place them back on the housing market. Urban centers can be particularly affected by this problem because property prices are (or have become) so high that it is more appealing for proprietors to resell dilapidated property (or to wait until it is dilapidated) at the going urban rate than to continue to rent it.
Government and associations have invented many approaches to reigning in this urban problem, one of the side effects of which is the creation of urban blight (urban areas that are uninhabited are dilapidated).
File translated by //Michael C. Behrent – Assistant Professor – Department of History – Appalachian State University – Boone, NC 28608