Past Real Estate Crises in OCDE Countries
A
Axxe
Past Real Estate Crises in OCDE Countries
Country (period of crisis) UK (89-95)
Market (and price change) home
Reasons prices went up
· strong income growth in the early 1980s
· strong income growth expectations
· growth of wealth to income ratio
· stronger population growth in the key house buying group
· slow increase of supply (falling of construction of social housing)
· financial liberalization resulting in high LTV despite high real after-tax interest rates:
- 1981: abolition of the corset on bank lending;
- 1983: building societies were allowed to borrow from the money markets to finance home loans (before only their
customers deposits were used);
- 1985: centralised mortgage lenders very aggressive;
- 1986: further liberalisation of building societies;
· fall of interest rates in 1987-8
· 1988 and 1989: announcement effect of the replacement of the local property tax by the poll tax (1990)
· 1988: restriction of mortgage interest tax relief
· 1986-1989: speculative behavior
Reasons of bust
· 1988-90: increase of interest rates
· weaken of income growth and growth expectations
· demographic trends reversed
· reintroduction of property tax
· fall of wealth to income ratios
· negative rates of return
· household more cautious
· tighten of lending criteria
-> "Not even the major fall in nominal interest rates that took place in the 1990s, while real interest rates remained high, were sufficient to revive UK house price".
-> 1990-1995: record number of 345’000 household who had their homes repossessed; round 150’000 household had
mortgage arrears exceeding 10% of their debt
Country (period of crisis) UK (90-92)
Market (and price change) residential (14%) commercial (27%)
Reasons prices went up
· after stock market crash of 1987, Bank of England feared contraction on consumption due to wealth effect and eased considerably credit keeping low interest rate, fueling a real estate boom
· many small and medium sized banks, almost only active in mortgage lending, contributed to the boom by lending aggressively. Moreover there had been huge capital inflows (43% of RE loans were held by foreign banks, included 12% by Japanese banks)
· UK office leases are usually long term (up to 25 years) and allowed to be reviewed upward only (e.g. after increase in consumer price index or in mortgage rate). Hence the real office prices could behave like bonds; when mortgage rate falls prices could rise. These contractual rigidities together with the time-consuming construction of offices (relative to residential or industrial real estates) could explain the higher bubble experienced for offices price
Reasons of bust
· economic downturn after real estate boom
· the monetary policy was tightened, the real economy moved into recession and the real estate bubble burst, implying huge banking credit losses and small banks failures
Country (period of crisis) US (85-95)
Market (and price change) CRE, in particular: offices (56%) retail sector (26%)
Reasons prices went up
· tax-law changes and accounting practices (depreciation of a building over 15 years, shorter than its economic life and "acceleration" of tax deductions, lower of marginal tax rates)
· behavior of commercial banks: loosen of lending policies with low DSC, high LTV, stress on the collateral value and lending outside of the local market (under intense competition, upfront fees for these business, high margin)
· quality of appraisals: less and less rigorous
Reasons of bust
· context: - CRE highly leveraged -> very sensible to rise in interest rates. market not transparent
· cyclical development: recession in 90-91-> less demand of commercial space, rents, returns
· behavior of commercial banks: decrease of loans because of closing of institutions (dried up the source of financing), increase of regulatory capital behind CRE
· quality of appraisals: in 89 more professional
-> overbuilding cycle: bust with increase of vacancy rates (due to decrease of office employment and total employment);
Country (period of crisis) Japan (90-01)
Market (and price change) all RE markets
Reasons prices went up
· economic expansion with very low interest/mortgage rate (historical low of 2.5% in 1986)
· fiscal incentives for RE investment and property, like low RE capital gains and bequest taxes
· lending boom, banks lent a lot to non-bank lending institutions, active in mortgage lending
· tendency for banks and nonbank lending institutions to take mortgage collateral without really analyzing debtors profitability
· inelasticity of urban land and offices supply
· equity cross-holding between banks and corporations causes convergence of interests
· many firms borrowed against overvalued RE collateral to invest abroad (mainly in bonds and real estate)
· IPRE lending raise from 7% of total bank loans in1985 to 17% in 1990.
· big boom in RE markets was accompanied with speculative bubble in stock markets similar crises in other places (e.g. in Paris, see below)
Reasons of bust
· then tightened monetary policy to dampen inflation by strongly raising rates (from 2.5 to 6% in 1990)
· this sudden shortage of liquidity causes both stock market (50% fall in 1990) and RE markets (40% fall from 1990 to 1994 for Tokyo housing prices) to contract
· big credit losses for non-bank financial institutions
· banks’ balance sheet deteriorated (also because of fall in their equity portfolio’s value), implying more restrictive lending policies, credit rationing
· negative household’s wealth effect on consumption
· withdrawal of investment made abroad which helped to trigger then the country incurred a big recession and financial crisis from which it is recovering only now
· even if RE markets helped to trigger the crisis, the long lasting recession is more complex and due to several structural reasons
Country (period of crisis) France, Paris, (90-93)
Market (and price change) residential (25%)
Reasons prices went up
· economic expansion, GDP growth above long-term trend (peak of 4.8% in 1988, 4.7% in 1989)
· monetary policy did not react before 1990, the interest rate were already quite high. they did not fear very much inflation
· increasing residential prices with big differences between Pariscentre (100% increase for 1984-1990) and Paris- periphery (25% increase for the same period)
Reasons of bust
· economic slowdown in 1990, then recession in 1992
· slight increase in short term rates (up 1% by the end of 1991 to 11%)
· raising unemployment, even if the 1992 national level (10.3%) was not lower than in 1987 (10.5%), big impact on income expectations
· without big expected inflation, household affordability worsened considerably and demand fell
Country (period of crisis) France, Paris, (90-93)
Market (and price change) offices (40%)
Reasons prices went up
· economic expansion (see above)
· restrictive regulation against offices construction was removed in 1985
· 40% increase in the offices stock for Paris region
· capital markets deregulation, big capital inflows from abroad (mainly Japanese banks investing in real estate)
· offices prices doubled (100% increase) from 1986 to 1990
Reasons of bust
· economic slowdown in 1990
· withdrawal of foreign capital (mainly Japanese and Swedish because of their respective crises): foreign investment in offices shrank from 2 billions in 1989 to 250 millions in 1992
· big over-supply also because time new constructions of highlyfurnished offices started during expansion were finished when demand was falling
Country (period of crisis) Western Germany (93-99)
Market (and price change) residential
Reasons prices went up
· 1988-1993: strong immigration (+10% households)
· 1993: peak of rent increase
· housing cost per household: 16 to 20% disposable income
· higher construction and land costs (1988-1993)
Over-investment period:
· government promotional measures (substantial depreciation facilities for the construction of rented housing, social welfare housing construction) -> strong increase of supply first owner-occupied houses, apartment blocks (1994-1995)
· tax concessions, financial subsidies in East German
Reasons of bust
· Context: around 60% of household live in rented dwellings
· slow down of population increase
· high vacancy rate in 1998 due to overinvestment in east German residential construction
· deceleration of housing rent in 1999
· drop of construction permits in 2000
· reduction of government promotion of residential and reform in tenancy-law (lower limit for rent increase, shorter period of notice for terminating leases) -> potential investors reconsidered their yield expectations w.r.t. residential properties (financial markets were offering attractive alternative) -> retirements from housing market -> strong decrease of new housing
Country (period of crisis) Norway (88-93)
Reasons prices went up
· sudden liberalization of lending market in expansion period
· fiscal incentives for mortgages borrowing
· pro-cyclical monetary policy & inflation (negative real interest rate for households) fueling further the real estate boom
Reasons of bust
· devaluations of fixed exchange rate
· then raising interest rate & recession
Country (period of crisis) Sweden (91-94)
Market (and price change) IPRE, mainly commercial
Reasons prices went up
· sudden liberalization of lending market in expansion period
· fiscal incentives for mortgage borrowing over-investment in IPRE
Reasons of bust
· devaluations of fixed exchange rate
· then raising interest rate & recession
· economic recession provoked by real estate market crash
Country (period of crisis) UK (89-95)
Market (and price change) home
Reasons prices went up
· strong income growth in the early 1980s
· strong income growth expectations
· growth of wealth to income ratio
· stronger population growth in the key house buying group
· slow increase of supply (falling of construction of social housing)
· financial liberalization resulting in high LTV despite high real after-tax interest rates:
- 1981: abolition of the corset on bank lending;
- 1983: building societies were allowed to borrow from the money markets to finance home loans (before only their
customers deposits were used);
- 1985: centralised mortgage lenders very aggressive;
- 1986: further liberalisation of building societies;
· fall of interest rates in 1987-8
· 1988 and 1989: announcement effect of the replacement of the local property tax by the poll tax (1990)
· 1988: restriction of mortgage interest tax relief
· 1986-1989: speculative behavior
Reasons of bust
· 1988-90: increase of interest rates
· weaken of income growth and growth expectations
· demographic trends reversed
· reintroduction of property tax
· fall of wealth to income ratios
· negative rates of return
· household more cautious
· tighten of lending criteria
-> "Not even the major fall in nominal interest rates that took place in the 1990s, while real interest rates remained high, were sufficient to revive UK house price".
-> 1990-1995: record number of 345’000 household who had their homes repossessed; round 150’000 household had
mortgage arrears exceeding 10% of their debt
Country (period of crisis) UK (90-92)
Market (and price change) residential (14%) commercial (27%)
Reasons prices went up
· after stock market crash of 1987, Bank of England feared contraction on consumption due to wealth effect and eased considerably credit keeping low interest rate, fueling a real estate boom
· many small and medium sized banks, almost only active in mortgage lending, contributed to the boom by lending aggressively. Moreover there had been huge capital inflows (43% of RE loans were held by foreign banks, included 12% by Japanese banks)
· UK office leases are usually long term (up to 25 years) and allowed to be reviewed upward only (e.g. after increase in consumer price index or in mortgage rate). Hence the real office prices could behave like bonds; when mortgage rate falls prices could rise. These contractual rigidities together with the time-consuming construction of offices (relative to residential or industrial real estates) could explain the higher bubble experienced for offices price
Reasons of bust
· economic downturn after real estate boom
· the monetary policy was tightened, the real economy moved into recession and the real estate bubble burst, implying huge banking credit losses and small banks failures
Country (period of crisis) US (85-95)
Market (and price change) CRE, in particular: offices (56%) retail sector (26%)
Reasons prices went up
· tax-law changes and accounting practices (depreciation of a building over 15 years, shorter than its economic life and "acceleration" of tax deductions, lower of marginal tax rates)
· behavior of commercial banks: loosen of lending policies with low DSC, high LTV, stress on the collateral value and lending outside of the local market (under intense competition, upfront fees for these business, high margin)
· quality of appraisals: less and less rigorous
Reasons of bust
· context: - CRE highly leveraged -> very sensible to rise in interest rates. market not transparent
· cyclical development: recession in 90-91-> less demand of commercial space, rents, returns
· behavior of commercial banks: decrease of loans because of closing of institutions (dried up the source of financing), increase of regulatory capital behind CRE
· quality of appraisals: in 89 more professional
-> overbuilding cycle: bust with increase of vacancy rates (due to decrease of office employment and total employment);
Country (period of crisis) Japan (90-01)
Market (and price change) all RE markets
Reasons prices went up
· economic expansion with very low interest/mortgage rate (historical low of 2.5% in 1986)
· fiscal incentives for RE investment and property, like low RE capital gains and bequest taxes
· lending boom, banks lent a lot to non-bank lending institutions, active in mortgage lending
· tendency for banks and nonbank lending institutions to take mortgage collateral without really analyzing debtors profitability
· inelasticity of urban land and offices supply
· equity cross-holding between banks and corporations causes convergence of interests
· many firms borrowed against overvalued RE collateral to invest abroad (mainly in bonds and real estate)
· IPRE lending raise from 7% of total bank loans in1985 to 17% in 1990.
· big boom in RE markets was accompanied with speculative bubble in stock markets similar crises in other places (e.g. in Paris, see below)
Reasons of bust
· then tightened monetary policy to dampen inflation by strongly raising rates (from 2.5 to 6% in 1990)
· this sudden shortage of liquidity causes both stock market (50% fall in 1990) and RE markets (40% fall from 1990 to 1994 for Tokyo housing prices) to contract
· big credit losses for non-bank financial institutions
· banks’ balance sheet deteriorated (also because of fall in their equity portfolio’s value), implying more restrictive lending policies, credit rationing
· negative household’s wealth effect on consumption
· withdrawal of investment made abroad which helped to trigger then the country incurred a big recession and financial crisis from which it is recovering only now
· even if RE markets helped to trigger the crisis, the long lasting recession is more complex and due to several structural reasons
Country (period of crisis) France, Paris, (90-93)
Market (and price change) residential (25%)
Reasons prices went up
· economic expansion, GDP growth above long-term trend (peak of 4.8% in 1988, 4.7% in 1989)
· monetary policy did not react before 1990, the interest rate were already quite high. they did not fear very much inflation
· increasing residential prices with big differences between Pariscentre (100% increase for 1984-1990) and Paris- periphery (25% increase for the same period)
Reasons of bust
· economic slowdown in 1990, then recession in 1992
· slight increase in short term rates (up 1% by the end of 1991 to 11%)
· raising unemployment, even if the 1992 national level (10.3%) was not lower than in 1987 (10.5%), big impact on income expectations
· without big expected inflation, household affordability worsened considerably and demand fell
Country (period of crisis) France, Paris, (90-93)
Market (and price change) offices (40%)
Reasons prices went up
· economic expansion (see above)
· restrictive regulation against offices construction was removed in 1985
· 40% increase in the offices stock for Paris region
· capital markets deregulation, big capital inflows from abroad (mainly Japanese banks investing in real estate)
· offices prices doubled (100% increase) from 1986 to 1990
Reasons of bust
· economic slowdown in 1990
· withdrawal of foreign capital (mainly Japanese and Swedish because of their respective crises): foreign investment in offices shrank from 2 billions in 1989 to 250 millions in 1992
· big over-supply also because time new constructions of highlyfurnished offices started during expansion were finished when demand was falling
Country (period of crisis) Western Germany (93-99)
Market (and price change) residential
Reasons prices went up
· 1988-1993: strong immigration (+10% households)
· 1993: peak of rent increase
· housing cost per household: 16 to 20% disposable income
· higher construction and land costs (1988-1993)
Over-investment period:
· government promotional measures (substantial depreciation facilities for the construction of rented housing, social welfare housing construction) -> strong increase of supply first owner-occupied houses, apartment blocks (1994-1995)
· tax concessions, financial subsidies in East German
Reasons of bust
· Context: around 60% of household live in rented dwellings
· slow down of population increase
· high vacancy rate in 1998 due to overinvestment in east German residential construction
· deceleration of housing rent in 1999
· drop of construction permits in 2000
· reduction of government promotion of residential and reform in tenancy-law (lower limit for rent increase, shorter period of notice for terminating leases) -> potential investors reconsidered their yield expectations w.r.t. residential properties (financial markets were offering attractive alternative) -> retirements from housing market -> strong decrease of new housing
Country (period of crisis) Norway (88-93)
Reasons prices went up
· sudden liberalization of lending market in expansion period
· fiscal incentives for mortgages borrowing
· pro-cyclical monetary policy & inflation (negative real interest rate for households) fueling further the real estate boom
Reasons of bust
· devaluations of fixed exchange rate
· then raising interest rate & recession
Country (period of crisis) Sweden (91-94)
Market (and price change) IPRE, mainly commercial
Reasons prices went up
· sudden liberalization of lending market in expansion period
· fiscal incentives for mortgage borrowing over-investment in IPRE
Reasons of bust
· devaluations of fixed exchange rate
· then raising interest rate & recession
· economic recession provoked by real estate market crash
V
VVP™
и к чему это?
A
Axxe
сорри, при копипасте оформление съехало. вместо символа · - читайте буллет (кружочек такой). а это к тому, что экономика - она и в России экономика, а пока почитайте как это было у них.
N
Netman
всё к тому же
V
VVP™
я хоть и ин-яз заканчивал - грузиться не буду
A
Axxe
начало перевода. перевод грубый.
Страна (период кризиса) Великобритания (89-95)
Рынок (и изменение цены) жильё
Причины роста цен
- сильный рост доходов в начале 1980х
- сильное ожидание роста доходов
- рост коэф. wealth/income [коэффициент накоплений]
- сильный рост популяции в ключевой группе покупателей жилья
- медленное увеличение снабжения (уменьшение объёмов возводимого социального жилья)
- финансовая либерализация повлекшая высокий уровень LTV [loan-to-value - отношение размера кредита к стоимости предмета залога] несмотря на высокие реальные чистые процентные ставки
- 1981: отмена ограничений на банковские кредиты;
- 1983: ЖСК разрешено привлекать деньги с денежных рынков на финансирование жилищных ссуд (до этого использовались только депозиты их клиентов);
- 1985: очень агрессивное централизованное ипотечное кредитование;
- 1986: дополнительная либерализация ЖСК;
- падение процентных ставок 1987-8
- 1988 и 1989: эффект объявления замены местных налогов на имущество подушным налогом (1990)
- 1988: ограничение освобождения от уплаты налога процента по закладной
- 1986-1989: спекулятивное поведение
Причины падения
- 1988-90: увеличение процентных ставок
- ослабление роста доходов и ожиданий роста доходов
- разворот демографических трендов
- возврат к системе налога на имущество
- падение коэф. wealth/income
- отрицательные нормы прибыли
- осторожность домовладельцев
- ужесточение критериев кредитования
-> "Даже существенное падение номинальных процентных ставок, которое имело место в 1990х, пока реальные процентные ставки оставались высокими, не было достаточным, чтобы восстановить цену на недвижимость в Великобритании".
-> 1990-1995: рекордное число - 345’000 семейств, подвергшихся изъятию жилья [за неплатежи]; около 150’000 семейств имело долги по ипотеке свыше 10% от общей задолженности
Страна (период кризиса) UK (90-92)
Рынок (и изменение цены) жилой (14%) коммерческой (27%)
Причины роста цен
- после краха фондового рынка в 1987, Bank of England опасался сокращения потребления из-за эффекта богатства и значительно облегчил выдачу кредитов, сохраняя низкие процентные ставки, обеспечив бум рынка недвижимости.
- множество мелких и средних банков, занимавшихся почти только ипотекой, внесли свой вклад в бум агрессивным кредитованием. Кроме того был огромный приток капитала (43% ссуд были выданы иностранными банками, в т. ч. 12% - банками Японии)
- аренда офисов в Великобритании обычно долгосрочная (до 25 лет) и может быть пересмотрена только в сторону увеличения (например, после увеличения индекса потребительских цен или процентных ставок по закладным). Следовательно реальные цены на офисы могли вести себя как облигации; когда процентные ставки падают цены растут. Эта жесткость в контрактах, вместе с отнимающим много времени строительством офисов (по сравлению с жильём или промышленной недвижимостью) объясняет больший пузырь.
Причины падения
- спад экономики после бума недвижимости
- ужесточение кредитно-денежной политики, реальная экономика съехала в рецессию и пузырь на рынке недвижимости лопнул, приведя к огромым потерям банковских кредитов и банкротству мелких банков.
продолжение следует.
Страна (период кризиса) Великобритания (89-95)
Рынок (и изменение цены) жильё
Причины роста цен
- сильный рост доходов в начале 1980х
- сильное ожидание роста доходов
- рост коэф. wealth/income [коэффициент накоплений]
- сильный рост популяции в ключевой группе покупателей жилья
- медленное увеличение снабжения (уменьшение объёмов возводимого социального жилья)
- финансовая либерализация повлекшая высокий уровень LTV [loan-to-value - отношение размера кредита к стоимости предмета залога] несмотря на высокие реальные чистые процентные ставки
- 1981: отмена ограничений на банковские кредиты;
- 1983: ЖСК разрешено привлекать деньги с денежных рынков на финансирование жилищных ссуд (до этого использовались только депозиты их клиентов);
- 1985: очень агрессивное централизованное ипотечное кредитование;
- 1986: дополнительная либерализация ЖСК;
- падение процентных ставок 1987-8
- 1988 и 1989: эффект объявления замены местных налогов на имущество подушным налогом (1990)
- 1988: ограничение освобождения от уплаты налога процента по закладной
- 1986-1989: спекулятивное поведение
Причины падения
- 1988-90: увеличение процентных ставок
- ослабление роста доходов и ожиданий роста доходов
- разворот демографических трендов
- возврат к системе налога на имущество
- падение коэф. wealth/income
- отрицательные нормы прибыли
- осторожность домовладельцев
- ужесточение критериев кредитования
-> "Даже существенное падение номинальных процентных ставок, которое имело место в 1990х, пока реальные процентные ставки оставались высокими, не было достаточным, чтобы восстановить цену на недвижимость в Великобритании".
-> 1990-1995: рекордное число - 345’000 семейств, подвергшихся изъятию жилья [за неплатежи]; около 150’000 семейств имело долги по ипотеке свыше 10% от общей задолженности
Страна (период кризиса) UK (90-92)
Рынок (и изменение цены) жилой (14%) коммерческой (27%)
Причины роста цен
- после краха фондового рынка в 1987, Bank of England опасался сокращения потребления из-за эффекта богатства и значительно облегчил выдачу кредитов, сохраняя низкие процентные ставки, обеспечив бум рынка недвижимости.
- множество мелких и средних банков, занимавшихся почти только ипотекой, внесли свой вклад в бум агрессивным кредитованием. Кроме того был огромный приток капитала (43% ссуд были выданы иностранными банками, в т. ч. 12% - банками Японии)
- аренда офисов в Великобритании обычно долгосрочная (до 25 лет) и может быть пересмотрена только в сторону увеличения (например, после увеличения индекса потребительских цен или процентных ставок по закладным). Следовательно реальные цены на офисы могли вести себя как облигации; когда процентные ставки падают цены растут. Эта жесткость в контрактах, вместе с отнимающим много времени строительством офисов (по сравлению с жильём или промышленной недвижимостью) объясняет больший пузырь.
Причины падения
- спад экономики после бума недвижимости
- ужесточение кредитно-денежной политики, реальная экономика съехала в рецессию и пузырь на рынке недвижимости лопнул, приведя к огромым потерям банковских кредитов и банкротству мелких банков.
продолжение следует.
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