The Unassuming Economist

The latest IMF report on Belgium says that:

“The housing market appears to be only moderately overvalued, but pockets of vulnerability exist. Having grown rapidly in the 2000s, residential housing prices did not experience a sharp decline during the crisis, and have since risen by about 20 percent in nominal terms. The price-to-rent and price-to-income ratios stand well above their historical averages. More sophisticated measures, however, indicate only a moderate overvaluation. Since 2015 there has been a reversal in the tightening of mortgage lending standards, as evidenced by a growing share of loans with high loan-to-value (LTV) and/or high debt service-to-income (DSI) ratios. Risks are mitigated to some extent by the fact that Belgian households generally hold considerable financial assets. Nevertheless, nearly a third of outstanding mortgage debt is held by households whose liquid financial assets cover less than six months of debt service.

It will be important to stand ready to tighten macroprudential conditions further if balance sheet risks were to grow significantly. To address growing risks in the housing market, the NBB in 2014 introduced a 5 percent risk weight add-on for banks using internal ratings models to determine their minimum regulatory capital requirements for mortgage loans. In 2017, the NBB proposed a tightening of macroprudential policies through a targeted increase in capital charges linked to the riskiness of exposures, proxied by LTV ratios. However, as this proposal was not accepted by the government, the NBB subsequently proposed a new macroprudential measure requiring banks with riskier mortgage portfolios to hold more capital. This measure should be enacted promptly. Looking ahead, it will be important to strengthen the NBB’s ability to deploy cyclical macroprudential measures in the financial sector in a timely manner.”

 

 

The IMF’s latest report on Malaysia says that:

“Measures could be considered to mitigate risks to financial stability. For the housing (…) market, possible measures could include risk weights and lending limits targeting the construction sector, and measures encouraging developers to lease the housing stock that remains unsold for an extended period. To encourage the rental market, the authorities could look into reforming the regulations pertaining to rents and tenant-landlord relationships or granting developers tax exemptions for rental income on leasing units, within the context of the approved government budget envelope. On mortgage lending, sector-wide LTVs (on the second and first properties) and debt service to income limits could supplement the ones that are presently selfimposed by the banks, complementing the existing limit for borrowers with income under 3,000 ringgits per month. Strong economic conditions offer a good window of opportunity for the above policy adjustments.”

On cross-country:

• Global House Price Index – Q4 2017 – Knight Frank
• 2018 Emerging Models in Real Estate Report – Mike DelPrete

On the US:

• The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco – NBER
• Shocker! Rent Control Makes Housing Scarcer and More Expensive – Reason
• Eliminating Fannie Mae and Freddie Mac without legislation – American Enterprise Institute
• Income Doesn’t Determine Whether People Buy Homes, for Now – Zillow
• De Blasio Bolsters Affordable Housing, but at What Price? – New York Times
• NYC perseveres with affordable housing agenda despite costly obstacles – Curbed
• Home sales falling in the U.S. – but not for the reason you think – Global Property Guide
• The Rise and Fall of American Public Housing – Citylab
• In California, Momentum Builds for Radical Action on Housing – Citylab
• State and Local Health and Housing Integration Projects – Center on Budget and Policy Priorities
• The mortgage market risk no one’s talking about, plus a proposal to redesign the system – Brookings

On other countries:

• [Germany] Landlords Shed No Tears Over Broken German Housing Market – Wall Street Journal
• [Nambia] House Prices in Namibia – IMF
• [New Zealand] Funding cost pass-through to mortgage rates – Reserve Bank of New Zealand
• [New Zealand] New Zealand to hit property speculators with taxes on capital gains – Global Property Guide
• [Switzerland] That Zurich Lakeside Property May Finally Become More Affordable – Bloomberg
• [United Kingdom] The housing market in the macroeconomy – National Institute of Economic and Social Research
• [United Kingdom] Detailed household expenditure for mortgage-paying households, by gross income quintile group, UK, financial year ending 2015 to financial year ending 2017 – Office for National Statistics

Photo by Aliis Sinisalu

The IMF’s latest report on Namibia says that:

“Recently decelerating house prices and banks’ and households’ large exposure to mortgage loans raise concerns about risks from sudden corrections in the housing market. Staff estimate that, with the economy decelerating, house prices remain on average overvalued by about 10 percent, down from about 18 percent three years ago. FSAP sensitivity analysis suggests that all banks are resilient to a full correction in house price overvaluation. However, in the case of an over-correction (e.g., 20 percent price decline), some banks would be unable to comply with capital requirements. Under these scenarios, banks would deleverage with negative effects on credit and growth.”

 

On cross-country:

• Housing Europe Yearbook 2017 – Housing Europe
• Supply is the cause of the housing crisis – and we do need to build more homes in successful cities – Centre for Cities
• Real estate agent performance and fee structure – Vox
• The “V” in LTV and Why it Matters – European Covered Bond Council
• Strong house price rises continue in Europe, US, Canada and parts of Asia. The Middle East is weak. – Global Property Guide

On the US:

• California wants cities to build more housing near transit hubs. Can LA improve its track record on TOD? – Brookings
• America’s taxpayers shoulder too much housing risk – Economist
• Long-Term Outcomes of FHA First-Time Homebuyers – Federal Reserve Bank of New York
• Do State Income Taxes Affect Home Values? – Harvard Joint Center for Housing Studies
• The Number of High-Income Renters Surged, Especially in the Nation’s Highest-Cost Markets – Harvard Joint Center for Housing Studies
• What Would it Take for HUD to Meaningfully Increase Inclusion? – Harvard Joint Center for Housing Studies
• Foreign Investors Pile Into U.S. Student Housing – Wall Street Journal
• Airbnb CEO pledges to take more responsibility for impact to housing – Reuters
• Housing Bubble’s 10th Burst-Day – Real Estate Center at Texas A&M University
• How Do Mortgage Refinances Affect Debt, Default, and Spending? Evidence from HARP – Federal Reserve Bank of New York

On other countries:

• [Austria] Why Vienna remains a renter’s paradise – Financial Times
• [Canada] Toronto’s housing supply challenge and the growth plan paradox – Reuters
• [Chile] Squatters, Shanties, and Technocratic Professionals: Urban Migration and Housing Shortages in Twentieth-Century Chile – City University of New York
• [Malaysia] Affordable Housing: Challenges and the Way Forward – Central Bank of Malaysia
• [New Zealand] Residential construction and population growth in New Zealand: 1996-2016 – Reserve Bank of New Zealand
• [Spain] The Financial Transmission of Housing Bubbles: Evidence from Spain – Universitat Pompeu Fabra
• [Singapore] Singapore swing: pent-up demand boosts property prices – Financial Times

Photo by Aliis Sinisalu