The Unassuming Economist

Inclusive Growth

Global Housing Watch

Forecasting Forum

Energy & Climate Change

Wednesday, January 20, 2016

Housing Market in Ireland

“Housing prices have risen by about 33 percent since their nadir in 2013. Cash purchases have lately accounted for about half of total housing purchases. Nonetheless, the CBI’s announcement in October 2014 of macroprudential measures (in force since February 2015) has been associated with moderating expectations of future price increases, and has thus reduced the speculative demand for housing. Though slower, the rate of housing price appreciation continues, in part reflecting a weak supply response”, according to the IMF’s new report on Ireland.

On housing market policies,the report says that “New measures in housing seek to boost sluggish supply which is exacerbating imbalances in this market. The confluence of still-subdued construction activity and rising demand has resulted in an acute housing shortage—especially in central Dublin—that has fueled prices and rents and stretched affordability. Mindful of the mounting pressures, the government has launched a policy package comprising measures to both boost supply (including streamlined building codes and rebates to developers for qualifying projects) and stabilize rents (also increasing tenant rights and protections). Staff welcomed the increased focus on the housing market, noting that some of the measures would help reduce building costs and could jump start construction activity, particularly of lower-cost homes where profit margins are tighter. The mission, however, warned that the administrative measures on rents could reduce rates of return on investment properties and thus dissuade construction.”

Posted by Prakash Loungani at 5:08 PM

Labels: Global Housing Watch

Thursday, January 14, 2016

Housing Developments and Macroprudential Measures in Slovak Republic

“Despite a relatively low level of private debt, and (still) high system-wide resilience to potential shocks, fast credit expansion could result in financial imbalances. This paper reviews current credit conditions and household indebtedness, and explores the need for tightening the macroprudential stance. It proposes a set of additional supervisory measures that would build on steps taken by the National Bank of Slovakia (NBS) and guard against adverse impacts on financial stability and the housing market from rapid credit growth. In particular, fast credit growth relative to historical trends suggests that raising the counter-cyclical capital buffer (CCB) might be warranted in the near term. Macroprudential measures also could usefully be supported through fiscal and regulatory policies related to the housing sector” says a IMF paper on Slovak Republic.

The paper also notes that “While lending to non-financial corporate has declined in the wake of the financial crisis, there has been a continued rapid expansion of bank lending for housing, which increased at an average rate of about 13 percent over the last five years and now represents almost 45 percent of total lending. Banks’ exposure to the residential real estate sector is growing fast, with over 75 percent of household lending allocated to house purchases.”

Posted by Prakash Loungani at 4:34 PM

Labels: Global Housing Watch

Mortgage market in Poland

“Financial sector supervision has focused on mitigating vulnerabilities. While earlier tightening of prudential regulation has halted new FX lending, the Polish Financial Supervision Authority (KNF) has recently acted to limit risks associated with the still-high outstanding stock of foreign-currency mortgages. Banks with significant foreign-currency exposure have been requested to retain dividends and further boost capital. In staff’s view, these measures, along with case-by-case restructuring of distressed FX-denominated mortgages, should be sufficient to address vulnerabilities in this loan segment. Any wholesale measures, such as a system-wide conversion of FX mortgages into zloty, should thus be avoided. Alongside, the authorities have continued to address vulnerabilities in the small, but weak credit union segment”, according to the latest IMF report on Poland.

Posted by Prakash Loungani at 4:19 PM

Labels: Global Housing Watch

Wednesday, January 13, 2016

Effectiveness and Channels of Macroprudential Policies: Lessons from the Euro Area

A new IMF paper develops an analytical framework using bank lending survey data to investigate the effectiveness of macroprudential measures in containing housing booms in the euro area, the channels of transmission of such measures and their interaction with monetary policy.

The authors findings suggest that macro-prudential instruments targeting the cost of bank capital would be effective in slowing down mortgage credit growth, and given similar channels of transmission, would reinforce the impact of monetary policy tightening. Limits on loan-to-value ratios are also effective in containing housing booms, especially when monetary policy is excessively loose, and can therefore complement macro-prudential instruments affecting the cost of bank capital.