IT was barely a year ago that property prices were plummeting.
Since then, the world’s central banks have flooded the markets with an unprecedented liquidity tsunami that has lifted prices of assets like stocks and property. Liquidity comes in many forms, the most evident and tangible is lower interest rates, which immediately lower mortgage costs and allow potential borrowers to borrow more with the same level of disposable income.
It also reduces the returns on deposits which make it more attractive for depositors to redeploy their funds into higher yielding and more speculative assets like shares and property. Other forms of less tangible liquidity measures involve providing cheap funding for banks and printing money.
In China, the liquidity came in the form of generous lending by state-owned banks which boosted lending in the first half of 2009 by 7.37 Continue reading
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