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Do we need another approach to housing policies? 
Housing Europe – Finance Watch conference 
Housing Finance – It’s a choice ! 
Property bubbles or social and ecological resilience? 
Brussels, 5 November 2014 
Christophe André 
OECD Economics Department 
1
An exceptional global housing price boom 
Real housing prices, 1995=100 
2 
Source: OECD and National sources. 
050100150200250300350United StatesGermanyFranceUnited KingdomCanadaIrelandSpain
Current housing price orientation in OECD countries 
(as of September 2014) 
3 
Source: OECD and National sources. 
Continued fall 
Greece (-42), Italy (-23), Spain (-38), Slovenia (-27) 
Moderate fall 
France (-6), Finland (-3), Japan (-9), Portugal (-10) 
Broadly stable 
Belgium (+3), Czech Republic (-11), Denmark (-27), Hungary (-34), Korea (-3), Luxembourg (+7), Mexico (- 1), Netherlands (-24), Slovakia (-28) 
Moderate increase 
Austria (+22), Canada (+14), Germany (+18), Norway (+13), Sweden (+4), Switzerland (+26) 
Firm recovery 
Estonia (-34), United Kingdom (-9), Iceland (-27), Ireland (-44), New Zealand (+1), United States (-18) 
Rapid increase 
Australia (+8), Israel (+58) 
In parenthesis, percentage change in real housing prices relative to peak in 2006-08.
Gross household debt is high in many countries 
As a percentage of net disposable income 
4 
Source: OECD National Accounts Statistics. 
0 
30 
60 
90 
120 
150 
180 
210 
240 
270 
300 
330 
360 
2012 or latest available year 
2007
Credit risk 
Generally moderate 
But some cases of high risk lending (e.g. US, Hungary, Iceland) 
Defaults resulting from a sharp deterioration in macroeconomic conditions (e.g. euro area periphery) Funding risk 
Maturity mismatch (e.g. UK, Netherlands) 
Currency mismatch (e.g. Iceland, some Central and Eastern Europe countries) Macroeconomic risk 
Fall in consumption (e.g. US, UK, Denmark) 
Reduction in residential investment 
Second round impact on the economy and the financial sector 
What are the risks associated with high/growing household debt? 
5
Arrears in Spain 
Percentage of non-performing loans for house purchase (>30 days in arrears) 
6 
Source: Bank of Spain. 
0123456719899091929394959697989920000102030405060708091011121314
Construction has collapsed in many countries 
Housing starts 
7 
Source: European Mortgage Federation. 
0 
200.000 
400.000 
600.000 
800.000 
1.000.000 
1.200.000 
1.400.000 
1.600.000 
1.800.000 
2.000.000 
UK 
France 
Spain 
USA 
2001 
2006 
2012 (2011 for UK) 
0 
20.000 
40.000 
60.000 
80.000 
100.000 
120.000 
140.000 
2001 
2006 
2012 (2011 for Norway)
Housing cost overburden rate by tenure status, 2012 
Percentage of the population living in a household where the total cost of housing exceeds 40% of equivalised disposable income 
8 
Source: Eurostat.
Demand side: 
Financial regulation and supervision 
Tax systems often encourage home-ownership. Mortgage interest deductibility can be costly and tends to be regressive. If supply is rigid, capitalisation of tax advantage in housing prices Supply side: 
Zoning and planning regulations are often excessively tight 
Infrastructure investment is sometimes insufficient 
Supply of new affordable/social housing is often low (partly because of costs and potential side-effects – segregation, weakening work incentives and mobility) 
Private rental market regulations (rent control, balance of protection of tenant and landlord rights) are hampering the development of the rental market in some countries 
A holistic approach to housing is needed 
9
Monitoring of housing market developments and their macroeconomic impact: Economic Outlook http://www.oecd.org/eco/economicoutlook.htm 
Structural policies: Housing and the Economy (2011) http://www.oecd.org/eco/growth/housing-and-the-economy.htm 
Special chapters on housing in Economic Surveys http://www.oecd.org/eco/surveys/ 
Case study on the private rental market (Czech Republic, Finland, Germany, Netherlands): de Boer and Bitetti http://dx.doi.org/10.1787/5jxv9f32j0zp-en 
Social policies for housing (ongoing project) 
Cities http://www.oecd.org/gov/regional-policy/urbandevelopment.htm 
Selected OECD references on housing 
10
Housing markets have become increasingly volatile over the past decades. High household debt may entail risks for households, the financial system and the wider economy -> Need for adequate financial regulation and supervision. 
First-time buyers are increasingly excluded by high prices and deposit requirements -> But improving access to finance and providing demand-side subsidies is not enough (and can prove counterproductive). 
Access to decent housing is increasingly problematic for some segments of the population in many countries, which has deep social and economic consequences -> Housing policies are only part of the solution. 
Structural features of housing markets (e.g. land-use planning, taxation, regulations) can both limit the availability of decent housing and generate financial and macroeconomic instability -> A holistic approach to housing issues is needed. 
Conclusions 
11
Thank you!

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Christopher André- Do we need another approach to housing policies? #housingfinance

  • 1. Do we need another approach to housing policies? Housing Europe – Finance Watch conference Housing Finance – It’s a choice ! Property bubbles or social and ecological resilience? Brussels, 5 November 2014 Christophe André OECD Economics Department 1
  • 2. An exceptional global housing price boom Real housing prices, 1995=100 2 Source: OECD and National sources. 050100150200250300350United StatesGermanyFranceUnited KingdomCanadaIrelandSpain
  • 3. Current housing price orientation in OECD countries (as of September 2014) 3 Source: OECD and National sources. Continued fall Greece (-42), Italy (-23), Spain (-38), Slovenia (-27) Moderate fall France (-6), Finland (-3), Japan (-9), Portugal (-10) Broadly stable Belgium (+3), Czech Republic (-11), Denmark (-27), Hungary (-34), Korea (-3), Luxembourg (+7), Mexico (- 1), Netherlands (-24), Slovakia (-28) Moderate increase Austria (+22), Canada (+14), Germany (+18), Norway (+13), Sweden (+4), Switzerland (+26) Firm recovery Estonia (-34), United Kingdom (-9), Iceland (-27), Ireland (-44), New Zealand (+1), United States (-18) Rapid increase Australia (+8), Israel (+58) In parenthesis, percentage change in real housing prices relative to peak in 2006-08.
  • 4. Gross household debt is high in many countries As a percentage of net disposable income 4 Source: OECD National Accounts Statistics. 0 30 60 90 120 150 180 210 240 270 300 330 360 2012 or latest available year 2007
  • 5. Credit risk Generally moderate But some cases of high risk lending (e.g. US, Hungary, Iceland) Defaults resulting from a sharp deterioration in macroeconomic conditions (e.g. euro area periphery) Funding risk Maturity mismatch (e.g. UK, Netherlands) Currency mismatch (e.g. Iceland, some Central and Eastern Europe countries) Macroeconomic risk Fall in consumption (e.g. US, UK, Denmark) Reduction in residential investment Second round impact on the economy and the financial sector What are the risks associated with high/growing household debt? 5
  • 6. Arrears in Spain Percentage of non-performing loans for house purchase (>30 days in arrears) 6 Source: Bank of Spain. 0123456719899091929394959697989920000102030405060708091011121314
  • 7. Construction has collapsed in many countries Housing starts 7 Source: European Mortgage Federation. 0 200.000 400.000 600.000 800.000 1.000.000 1.200.000 1.400.000 1.600.000 1.800.000 2.000.000 UK France Spain USA 2001 2006 2012 (2011 for UK) 0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 2001 2006 2012 (2011 for Norway)
  • 8. Housing cost overburden rate by tenure status, 2012 Percentage of the population living in a household where the total cost of housing exceeds 40% of equivalised disposable income 8 Source: Eurostat.
  • 9. Demand side: Financial regulation and supervision Tax systems often encourage home-ownership. Mortgage interest deductibility can be costly and tends to be regressive. If supply is rigid, capitalisation of tax advantage in housing prices Supply side: Zoning and planning regulations are often excessively tight Infrastructure investment is sometimes insufficient Supply of new affordable/social housing is often low (partly because of costs and potential side-effects – segregation, weakening work incentives and mobility) Private rental market regulations (rent control, balance of protection of tenant and landlord rights) are hampering the development of the rental market in some countries A holistic approach to housing is needed 9
  • 10. Monitoring of housing market developments and their macroeconomic impact: Economic Outlook http://www.oecd.org/eco/economicoutlook.htm Structural policies: Housing and the Economy (2011) http://www.oecd.org/eco/growth/housing-and-the-economy.htm Special chapters on housing in Economic Surveys http://www.oecd.org/eco/surveys/ Case study on the private rental market (Czech Republic, Finland, Germany, Netherlands): de Boer and Bitetti http://dx.doi.org/10.1787/5jxv9f32j0zp-en Social policies for housing (ongoing project) Cities http://www.oecd.org/gov/regional-policy/urbandevelopment.htm Selected OECD references on housing 10
  • 11. Housing markets have become increasingly volatile over the past decades. High household debt may entail risks for households, the financial system and the wider economy -> Need for adequate financial regulation and supervision. First-time buyers are increasingly excluded by high prices and deposit requirements -> But improving access to finance and providing demand-side subsidies is not enough (and can prove counterproductive). Access to decent housing is increasingly problematic for some segments of the population in many countries, which has deep social and economic consequences -> Housing policies are only part of the solution. Structural features of housing markets (e.g. land-use planning, taxation, regulations) can both limit the availability of decent housing and generate financial and macroeconomic instability -> A holistic approach to housing issues is needed. Conclusions 11