The Unassuming Economist

On cross-country:

• Affordable Housing Crisis Spreads Throughout World – Wall Street Journal
• Film Director: Don’t Just Blame Gentrification for Housing Crisis – Wall Street Journal
• Mind the data gap: commercial property prices for policy – Bank for International Settlements

On the US:

• Bank Balance Sheets and Liquidation Values: Evidence from Real Estate Collateral – SSRN
• Expectations During the U.S. Housing Boom: Inferring Beliefs from Actions – NBER
• Banks’ Real Estate Exposure and Resilience – Federal Reserve Bank of San Francisco
• American Families Can’t Afford the Rent – Harvard Joint Center for Housing Studies
• San Francisco Fed Says Banks Could Weather a Big Hit to Housing – Bloomberg
• The Link Between Local Zoning Policy and Housing Affordability in America’s Cities – George Mason University
• Wall Street Puts the Squeeze on the Housing Market – Bloomberg
• California Home Prices Are So High, Even High-Income Households Can’t Keep Up – Zillow
• What’s Keeping Lower-Income Families from Homeownership? – Freddie Mac
• Are Planners Partly to Blame for Gentrification? – Citylab
• Mapping America’s Next Tech Hubs: A Look at Housing Market and Migration Trends in Atlanta, Austin, D.C. and Other Hot Destinations for Tech Companies – Redfin
• These Low-Income Communities Should Prepare for an Influx of Cash – Zillow
• Homebuying Startups Keep Raising Money in Softer Housing Market – Bloomberg
• Housing Prices, Supply, and Innovation – Cato Institute
• Upzoning Under SB 50: The Influence of Local Conditions on the Potential for New Supply – University of California, Berkeley
• The Neighborhoods Where Housing Costs Devour Budgets – Citylab
• Available Affordable Housing Is Down Across The State, Report Finds – wbur
• The Growing Shortage of Affordable Housing for the Extremely Low Income in Massachusetts – Federal Reserve Bank of Boston

On other countries:

• [Australia] What do house prices do to jobs? – Macro Business
• [Canada] Toronto Housing Market Steadies as Sellers Bide Their Time – Bloomberg
• [Canada] Canada’s house price boom takes off – Global Property Guide
• [Czech Republic] Czech mortgage market continues to fall in February – ING
• [Indonesia] The housing market in Indonesia rarely makes big moves – Global Property Guide
• [Ireland] Ireland Property Rush Risks Repeat of Crisis – Bloomberg
• [Japan] What Housing Crisis? In Japan, Home Prices Stay Flat – Wall Street Journal
• [Japan] NIMBYs Argue New Housing Supply Doesn’t Make Cities Affordable. They’re Wrong. – Reason
• [Latvia] Latvia’s house price rises decelerating – Global Property Guide
• [New Zealand] Household Leverage and Asymmetric Housing Wealth Effects- Evidence from New Zealand – Reserve Bank of New Zealand
• [Singapore] Singapore’s house price rises accelerating – Global Property Guide
• [Switzerland] Slowdown inevitable for house prices in Switzerland – Global Property Guide
• [Switzerland] Swiss Regulator Calls for Measures to Avert Property Bubble – Bloomberg
• [United Kingdom] Should tenants fear the rise of the corporate landlord? – Financial Times

From the IMF’s latest Global Financial Stability report:

“There’s good news for people living in Las Vegas, Miami and Phoenix: the risk of a housing bust like the one they endured during the global financial crisis is fairly small. For folks in Toronto and Vancouver, however, the picture hasn’t improved since 2008, and the risk of a large decline in house prices remains elevated.

Those are among the insights generated by the IMF’s new tool for assessing the danger of a severe downturn in home prices. Homeowners, of course, are keenly interested in the value of what is probably their biggest asset. But there is also a strong link between home prices, the financial system, and the economy. The link is especially powerful when prices go down – as we explain in Chapter Two of the IMF’s twice-yearly Global Financial Stability Report.

Why do home prices matter for the broader economy? Housing construction and related spending on things like home improvements account for one-sixth of the US and euro-area economies, making them among the largest components of GDP. What’s more, mortgages and other housing-related lending are a big part of banks’ assets in many countries, so changes in house prices affect the health of the banking system.

Boom-bust cycle

It’s no surprise, then, that more than two-thirds of financial crises in recent decades were preceded by a boom-bust cycle in home prices, and that central banks in the United States, China, Australia, and elsewhere have recently expressed concern about large increases in home prices.

Fortunately, the IMF’s new tool can help policy makers gauge the likelihood of a future housing downturn and take early steps to help limit the damage. The tool, dubbed House Prices at Risk, feeds into the Fund’s growth-at-risk model, which links financial conditions to the danger of an economic downturn (see the October 2017 GFSR .)

Our study encompasses data from 22 advanced economies, 10 emerging-market economies, and the major cities in those countries. We found that in most advanced economies in our sample, weighted by GDP, the odds of a big drop in inflation-adjusted house prices were lower at the end of 2017 than 10 years earlier but remained above the historical average. In emerging markets, by contrast, riskiness was higher in 2017 than on the eve of the global financial crisis. Nonetheless, downside risks to house prices remain elevated in more than 25 percent of these advanced economies and reached nearly 40 percent in emerging markets in our study. Among them, China stands out, especially its Eastern provinces.”

 

 

Continue reading here.

From the IMF’s latest report on Kuwait:

“Real estate is recovering, and equity markets have outperformed regional peers. The sales of investment and residential properties rebounded since mid-2018. Kuwaiti stocks outperformed other Gulf Cooperation Council (GCC) markets, and market capitalization rose, especially following the March 2018 announcement of Kuwait’s inclusion in the FTSE Russell Emerging Market Index.”

From the IMF’s latest report on Sweden:

“High housing prices and high market rents increase vulnerabilities and inequality. Despite their recent moderation, house prices have tripled in real terms since the mid-1990s, lifting
the price-to-income (PTI) ratio to almost 30 percent above its 20-year average, with Stockholm’s PTI nearly twice the national average and among the highest worldwide. New purchasers must take on high debts relative to income (DTI), typically at floating rates, a macrofinancial vulnerability (…). Moreover, long queues for rent-controlled apartments meant that those unable to purchase housing had to pay much higher rents on subletted or newly constructed apartments, that are estimated to be 65 percent higher on average. An “insider-outsider” problem arises as labor mobility to the main centers is most impaired for those without parents able to assist with large down payments, impeding growth and exacerbating intergenerational and regional inequality.

The “January agreement” includes promising steps but comprehensive housing reforms are needed given the scale of the problem. Key elements of a reform package include:

• Making the rental market work: in addition to fully liberalizing rents of newly constructed apartments, there is a need to phase out existing controls. A common approach is to apply market rents when there is a change in tenant. Access to the housing allowance could be expanded to cushion this adjustment (see below), while also applying a temporary “windfall” tax on significant rental income gains. To help reduce market rents more quickly, rental supply should be increased, such as by reducing impediments to sub-letting and to households renting out their own apartments, while containing macrofinancial risks from buy-to-let housing.

• Taxing property to rebalance the housing market: Sweden’s property tax was capped in 2008 to be among the lowest in the OECD, limiting the cost to households of occupying housing beyond their needs. A broad-based increase in the ceiling on the property tax would be most efficient, but an increase targeted to the main centers could be considered to incentivize mobility where it is most needed. Abolishing the interest on deferrals of capital gains taxes will help ease deterrents to mobility. An additional step to be considered is to tax only a portion of the capital gains on primary dwellings. Implementing a phase out of mortgage interest deductibility—which boosts housing demand and prices—would have limited impact on household finances currently given the low level of interest rates.

• Producing housing that is affordable: it is important to simplify the planning process to reduce the cost of construction which have risen by over 28 percent in real terms over the past 15 years, compared with 10 percent in the euro area. Productivity in the construction sector should be enhanced by strengthening competition, including by harmonizing land sale procedures across the municipalities and preventing requirements beyond national building standards in the approval process. The government should also expand existing subsidies for construction of affordable rental apartments, together with those for student and elderly housing in view of changing demographics.

Protecting households in the transition is important to help build broad consensus on comprehensive reforms. On average, the share of rental expenditure in disposable income would increase from 24 percent to 31 percent, with most impact on households in the lowest income decile, which could be cushioned by expanding payments under the existing housing allowance. However, this allowance is seldom paid to households in the second or third income quintiles, contributing to relatively low total expenditure on housing allowances in Sweden. There is a need to review the coverage and amounts of housing allowances to give confidence that a transition to market rents will be manageable.

The authorities recognize the long-standing structural weaknesses in the Swedish housing market. They emphasized that housing policies were politically contentious in Sweden, limiting the feasibility of some reforms that could be most effective in principle, such as raising property taxation. Nevertheless, implementing the measures included in the “January agreement” during the term of the government would represent a step forward.”

 

On cross-country:

• Scared of Stocks? Buy a House Instead – Bloomberg
• Can Upzoning Increase Housing Supply and Affordability? – Planetizen
• Changing the Housing Story – the Shaping Futures report – SF21

On the US:

• Why Housing Policy Is Climate Policy – New York Times
• Three Scenarios for Growth in Homeowner and Renter Households – Harvard Joint Center for Housing Studies
• How Poor Americans Get Exploited by Their Landlords – Citylab
• A Growing Problem in Real Estate: Too Many Too Big Houses – Wall Street Journal
• Rural America Faces a Housing Cost Crunch – Pew Charitable Trusts
• Zoned Out? The Determinants of Manufactured Housing Rents: Evidence from North Carolina – Journal of Housing Economics
• U.S. housing, consumer confidence data point to slowing economy – Reuters
• A Decade After the Housing Bust, the Exurbs Are Back – Wall Street Journal

On other countries:

• [Australia] Australia central bank research shows income, not just property weakness, key for policy – Reuters
• [Australia] Australia’s Property Stocks Are Ignoring the Housing Slump – Bloomberg
• [Canada] Trudeau housing plan ignores local drivers of affordability – Fraser Institute
• [Canada] The Big Short’s Steve Eisman raises bets against Canadian banks – Financial Times
• [Canada] Housing Is a Magnet for Money Launderers in Toronto: Study – Bloomberg
• [China] That Property Boom Could Be the Reason Employees Are Goofing Off – Bloomberg
• [Denmark] World’s Cheapest Mortgage May Be Around the Corner in Denmark – Bloomberg
• [Finland] Finland’s housing market remains weak – Global Property Guide
• [Italy] Italy House Price Drop Adds Woe for Economy in Recession – Bloomberg
• [Netherlands] Brexit Is Making It Even Harder to Find a Flat in Amsterdam – Bloomberg
• [United Arab Emirates] How Dubai can solve its lack of affordable housing – World Economic Forum