Housing and stock markets crash

Stock markets around the world have been falling sharply on fears of a credit crunch that could affect the financial sector.

I have little understanding of the economics. I have just figures which I pick up from business reports but I can’t deal with them as economists do. But the things I can share with them is that there is little that can be done by the bright economists or the economy illiterate like me when things go disastrously wrong. What settles the matters is the flow of cash from the consumers and investors. Without this the economists have just to make plans which can’t work.

One of the drawbacks of the economy or banking systems is speculations and interdependency. So if a major sector sneezes, the other sectors linked to it catch cold. The prospect of (big) profits is based on investments which can turn wrong. The core of the problem in the financial market is the fall of house sale which made it difficult for banks to retrieve their money by selling the houses on mortgage at higher prices in case the borrowers fail to pay their instalments. This has caused a chain of events affecting the operations of other banks as well as shareholders.

In Morocco, there is a system to help people with modest revenue to acquire a home. It’s called FOGARIM (which means in French Fonds de garantie pour les revenus irréguliers et modestes) or guarantee fund for modest and irregular revenues. This scheme has just started. It’s unlikely to cause any problem in the foreseeable future as there is a big demand for housing in Morocco, which is to the pleasure of investors and to the displeasures of the consumers is rising annually at a rate of at least 15% per year. Even foreign investors are flocking to major cities like Marrakesh where they are setting up different housing projects. They are cheap for the Europeans but very expensive for the locals. An apartment in Marrakesh city centre is valued at around £750 per square metres. So you can get a 1,076.39 ft² or a 100 m² apartment at £ 75,000, which is far cheaper compared to the prices in other major cities like London or Paris.

So while house sale is a major cause of financial difficulties in many Western banks, banks in Morocco are reaping the benefits of lending money to would-be house owners. The risk is when foreign investors in Morocco are also hit by the current crisis, this can put a halt to their investment in Morocco. As there is a great shortage of houses in Morocco, this can lead to even more rise in the prices of houses, which are in big demand by the locals as well as the foreigners who seek to settle in Morocco or simply like to have where to stay when on frequent visits.