The Unassuming Economist

IMF’s latest report on Germany says that:

“At the aggregate level, housing affordability remains good, and price developments moderate in international comparison, but growing regional differences warrant close monitoring. House prices have continued to accelerate but their level remains moderate, as do various indicators of mortgage affordability (price-to-rent, price-to-income). However, the picture is different when regional developments are considered. While house prices continue to fall in some rural areas, price growth has reached double-digits in large cities and university towns. In certain urban areas, overvaluation may amount to 30 percent according to the Bundesbank’s latest estimates. While there is no comprehensive data available on regional mortgage growth, there is some anecdotal evidence of looser underwriting standards in some areas.

Relaxing housing supply constraints would help mitigate price pressures. Last year the government adopted a package of measures to address supply shortages and improve affordability. The plan is progressing in coordination with local authorities and includes stepping up the sales of federally-owned land and properties below market price for affordable housing projects, more funds for social housing, and the promotion of building code harmonization. However, the authorities estimate that the supply of new housing units remained below demand in 2016. To significantly boost supply in the short term, these measures must be complemented by further encouragement for local authorities to relax zoning and height restrictions in areas under pressure. Lowering the effective transaction tax rate on new construction, as recommended by staff in the past, would also be helpful in this regard.

New legislation introducing macroprudential instruments for the real estate market was approved, but left the toolkit incomplete and important data gaps unaddressed. The new legislation broadens the macroprudential toolkit to include loan-to-value and amortization requirements, but does not include either debt-to-income or debt-service-to-income limits— instruments designed to limit borrower vulnerability to income and interest rate shocks, and ensure affordability. Most importantly, the new law does not include any provision for a granular, loan-by loan database, a central tenet of past staff recommendation to ensure the effective implementation of macroprudential tools. At a minimum, a regular (at least annual) survey should be conducted in hotspots to collect information on individual loans, and assess household leverage, loan affordability and the concentration of banks’ exposure.”

On cross-country:

• Global Residential Cities Index – Q1 2017 – Knight Frank
• Economic Activity, Credit Market Conditions, and the Housing Market – Macroeconomic Dynamics

On the US:

• FED Governor Jerome H. Powell on The Case for Housing Finance Reform – Speech, Event Video, and Coverage: Financial Times
• Are Home Prices Really Above Their Pre-Recession Peak? – Harvard Joint Center for Housing Studies
• Housing Sentiment at Record High as Consumers’ Confidence in Home-Selling Environment Strengthens – Fannie Mae
• What you want to know about California’s failed housing affordability law – Los Angeles Times
• It’s time for cities to start building their fair share of housing – Los Angeles Times

On other countries:

• Australian Housing ‘Bubble’ Fears Overblown, HSBC Economist Says – Bloomberg
• [Canada] Rental Ownership Structure in Canada – Canada Mortgage and Housing Corporation
• [Canada] Ontario’s One Cylinder Economy: Housing in Toronto and Weak Business Investment – Fraser Institute
• [Canada] Restrictive Land-Use Regulation: Strategies, Effects and Solutions – Frontier Centre for Public Policy
• [China] Relationship between the Chinese housing and marriage markets – VoxDev
• [China] The bubble dynamics of China’s housing boom – VoxDev
• [Germany] Cheap credit not fuelling German real estate bubble for now- central banker – Reuters
• [Norway] Are House Prices Overvalued in Norway? – IMF
• [Switzerland] UBS and Credit Suisse cut back on domestic mortgages – Financial Times

From a new IMF report:

“Inclusive growth is a priority that resonates globally today. It relates to a broad sharing of the benefits of, and the opportunities for, economic growth, and reflects growth that is robust and broad-based across sectors, promotes productive employment across the labor force, embodies equal opportunities in access to markets and resources, and protects the vulnerable.

The G20 has emphasized the need for inclusive growth. In this regard, the Hangzhou G20 leaders’ Summit in September 2016 renewed the emphasis on inclusive growth called for the forging of both a narrative for strong, sustainable, balanced and inclusive growth and for adopting a package of policies to make this possible. The communique stated that the G20 would “work to ensure that our economic growth serves the needs of everyone and benefits all countries and all people including in particular women, youth and disadvantaged groups, generating more quality jobs, addressing inequalities and eradicating poverty so that no one is left behind.” G20 Ministers returned to this in March 2017 in Baden-Baden noting that: “We reiterate our determination to use all policy tools––monetary, fiscal and structural––individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth, while enhancing economic and financial resilience.”

Economic growth and inequality, the two sides of inclusion, have a complex nexus that can generate tradeoffs. Growth is the basis for generating inclusion. Across countries, growth has been instrumental in narrowing income gaps; within countries, growth has reduced poverty and made possible higher living standards and job opportunities. But policies driven by an exclusive growth focus can also set back inclusion in certain circumstances. While some inequality is integral to a market economy, high and persistent inequality can undermine the sustainability of growth itself.”

Continue reading here.

A new IMF report finds:

“Vietnam is highly affected by climate change. Its long coastline, geographic location, and diverse topography and climates contribute to Vietnam being one of the most hazard-prone countries in the Asia-Pacific region. Given the high concentration of the population and economic assets in coastal lowlands and the significant role played by agriculture and fisheries in the economy, Vietnam is ranked among the five countries likely to be most affected by climate change. Over the last 50 years, temperatures have increased twice as fast as the global average, the sea level has risen by 20 centimeters and the frequency and intensity of extreme weather events (drought, flood, salinization) have risen sharply. Natural disasters result in 470 fatalities and cost 0.8 percent of GDP (annual average between 1990 and 2016).

Climate risks pose immense challenges. Based on the authorities’ climate change scenarios, by the end of the century, sea levels are expected to rise by up to a meter. Sea waters would then cover 40 percent of the Mekong Delta area (where half of the country’s rice is produced), 3 percent of coastal provinces and 20 percent of Ho Chi Minh City, impacting directly 10–12 percent of the population and reducing GDP by 10 percent. The sectors most affected will be agriculture, aquaculture, energy transportation and tourism.”

Continue reading here.

IMF’s latest report on Lithuania says that: “Housing price developments in Lithuania are not an immediate concern, but the Bank of Lithuania rightly keeps an eye on possible overheating and froth in certain market segments. Macroprudential tools are in place to step in if needed. The strength of some small non-systemic financial institutions needs continued attention and credit union reform should be completed in line with current plans.”