The Unassuming Economist | Housing Recoveries: Denmark, Ireland, Netherlands and Spain

Showing posts with label Global Housing Watch. Show all posts

Wednesday, January 7, 2015

Housing Recoveries: Denmark, Ireland, Netherlands and Spain

A new report by the IMF “(…) examines the experiences of Denmark, Ireland, the Netherlands, and Spain—four countries in which the house-price cycle has been especially large and that share a similar institutional environment (a common monetary policy and the EU’s institutional framework)—with a view to exploring how policies can best support economic recovery in the wake of a house-price bust. (…) These countries’ experiences share similarities, but also important differences. Shocks to house prices, unemployment, and bank balance sheets were most severe in Ireland and Spain, reflecting in part a higher amplitude of residential construction. However, the boom- bust cycle has, together with other shocks, left all four countries facing significant output gaps, as well as elevated levels of private-sector debt that pose headwinds for growth. Promoting recovery following a house-price bust requires a multi-pronged strategy. Large house-price busts can leave countries facing wide output gaps, a highly indebted private sector, and weaker bank balance sheets. Addressing these problems simultaneously can be challenging, as efforts often involve trade-offs (e.g., faster deleveraging can widen output gaps). A careful and multi-pronged strategy is thus required to minimize trade-offs and accelerate sustainable recovery. Important progress has been made in this regard in all four countries.” Read the full report here.

Also, read an iMFdirect blog post on the report here.

Posted by Prakash Loungani at 7:27 PM

Labels: Global Housing Watch

Friday, December 19, 2014

House Prices in Georgia

“Despite an overall positive outlook, there are several key macroeconomic vulnerabilities that would impact the financial sector: (…) Sudden decline in asset prices. As more than half of domestic private credit is backed by real estate, continued increases in real estate prices toward the pre-collapse level in 2008 could become a source of vulnerability,” says a new IMF report on Georgia.

Read the full article…

Posted by Prakash Loungani at 9:06 PM

Labels: Global Housing Watch

House Prices in Denmark

“Danish house prices bottomed out and have recently started to pick up gradually. From the 2007 peak to the 2012 bottom, real house price dropped by about 30 percent. Real house prices started to rise in 2013 and grew 2.6 percent (y/y) in the second quarter of 2014 even though the pace of house price recovery varies across regions and types of housing (e.g., a stronger recovery in the prices of owner occupied flats in the Copenhagen area). Staff estimates based on three different metrics (price-to income ratio, price-to-rent ratio, and model based) suggest that house prices are currently close to fundamentals,” says the latest IMF report on Denmark.

Moreover, the report says that “Danish household debt continues to be the highest among the OECD countries, in large part to finance housing wealth. Household debt has been always relatively high in Denmark, but it grew rapidly during the housing boom, facilitated by the introduction of deferred amortization loans in 2003, reaching about 300 percent of disposable income. On the other side of the balance sheet, household assets are also large with positive net worth. However, these assets consist mostly of illiquid mandatory pension accounts and housing, leaving households with limited liquid buffers and making them more vulnerable to interest rate shocks. The need to rebuild balance sheets has depressed private consumption, weighing on the recovery in recent years.” Continue reading here. Also, see a special note on the mortgage finance system here.

Posted by Prakash Loungani at 8:45 PM

Labels: Global Housing Watch

Macro-Prudential Policies in Kuwait

“The CBK has been proactive in introducing macroprudential regulations in line with international practices to mitigate potential financial stability risks. The main source of vulnerability to the banking system comes from credit concentration to the corporate sector and real estate, given the structure of Kuwait’s domestic market, which the central bank regulates through concentration limits. The main sectoral exposures of banks are in real estate, equity and household lending, the latter two regulated through ceilings on equity investments and debt-to-income limits, respectively. Having tracked increased activity in real estate, the central bank introduced a loan-to-value ratio for residential real estate for investment purposes of individuals in November 2013, to limit financial stability risks, which staff welcomes. Staff has also observed that activity has been recently increasing in investment properties and commercial real estate segments of the real estate market, which the central bank is closely watching and ready to use macroprudential tools to limit potential stability risks to the banking system arising from this sector,” according to latest IMF report on Kuwait.