Environmental Analysis of Starbucks

1446 Words Apr 4th, 2012 6 Pages
The impact of interest rate increasing on real estate market Generally, the increasing of the bank’s interest rate has crowding-out effect on the asset bubble. But how does interest rate affect the real estate market? We can analyze the effect of interest rate increasing on different market entities from micro-perspective.
FOR ONE THAT HAVING BOUGHT THE HOUSE: Monthly payment increases and the assets may shrink. Most of the housing mortgage loan is floating interest rate now. According to the rules, if the interest rate increases, the mortgage loan contract which has been signed will use the new interest rate since the January 1st next year. Assuming the owner has bought a real estate at a price of 1million RMB by using a 30-year,
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In the short run, the demand of the house inventory will fall.
FOR DEVELOPER: the interest rate of construction loan increases, the expected price changes. A. It will decrease the investment scale. For a real estate developer, if it want to develop a project, it should own some self-owned capital to develop, and in order to improve the efficiency of the capital, it will get some construction loan from the bank.. And as the interest rate increases, the cost of the capital increases. And the developer has been calculated this cost into the cost of management. If the sale price unchanged, the profit of the developer falls, and the return on assets follows to decrease. When the objective return equal or even lower than other industries, to some middle and small entities with high debt ratio, single financing ways and high management cost may choose to quit, and switch to other industry. Some may go bankruptcy. To some big entities, they may cut their investment scale on real estate and increase their investment on other industry of high return so that they can maintain the previous return on assets. And on the other hand, they will shift this management cost to the sales price of the house, so the consumption will burden this cost increasing, and they will get little impact. B. It will decrease the number of the real estate developers. Most of the developers achieve the indirect financing by loan from bank.. So

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