Environmental Analysis of Starbucks

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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, 80 percent mortgage loan. According to the 5.04% interest rate in 2008, his monthly payment is 4314.15 RMB. If the interest rate increases to 6%, 7%, 8% in the following years separately, and his income does not increase in these three years, his monthly payment will rise to 67% of his income. The owner is likely to face a hard situation. Relatively speaking, 20-year mortgage loan is a bit riskless. In the above circumstance, his monthly payment in the following three years will rise to 107.86%, 116.01%, 124.11% of the first year separately. Besides the monthly payment increases, in some cities that have bubbles in house price, the real estate that the owner owned is likely to devaluate, as a result of the bubbles being crowding out in some way. And the speed of the devaluation may be surprising. The special case of the house price bubble deflated in Hongkong 1997, the price of the house shrunk by two-thirds. That means, the housing of 1million dollars only worth 300 thousand dollars or so. Of course, the range of the devaluation is positively relative to the bubble of the house price. So such a great devaluation in house price will not come to our country, even though some areas has been thought to be already in a foam of the...
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