A property bubble occurs when speculation causes the price to increase which has the knock on effect of producing more speculation. The price of the asset then reaches unsustainable levels and then the bubble bursts which is known as a crash which results in a sudden drop in prices.

Bubbles have a negative impact on the economy because the crash which usually follows an economic bubble can destroy a large amount of wealth and cause continuing economic fallout as was the case of the Great Depression in the 1930s for much of the world and the 1990s for Japan.

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