This introduction summarizes the various articles contained in the issue of Housing Finance International. It provides context on recent economic developments in Asia and their impact on housing markets. It then previews each of the five articles, concisely summarizing their topics and key arguments. The first article examines the banking crises in Sweden and Japan in the 1990s and their effects on housing. The second reviews the impact of the financial crisis on mortgage markets in former Soviet countries. The third discusses enhancing tools to measure and manage mortgage default risk. The fourth argues for a contextual policy approach to housing challenges in Central and Eastern Europe. The fifth suggests using financial derivatives to separate the economic value and shelter value of homeownership.

1. Editor’s Introduction
Editor’s Introduction
 By Friedemann Roy
Recently, Dubai opened the world’s tallest tower Sweden and Japan, the second describes the demand, especially for lower- and middle-income
(at 828m). This launch took place after the eco- macroeconomic consequences of the crises and groups. Thirdly, rental markets are small and are
nomy had suffered from an immense economic the policies followed to deal with these. The third even starting to diminish in some countries, which
shock and crushing property prices, requiring section discusses possible lessons emerging tend to operate within an inadequate legal frame-
a 10 billion US$ bail-out loan by neighbouring from dealing with the crises. Finally, the fourth work. Lastly, housing policies in CEE countries are
Abu Dhabi. This opening seems to be a “we can section summarises and concludes. evolving amidst conflicting and often unclear mes-
still” bounce back reaction to demonstrate to the sages from the European Commission regarding
outside world the opportunities this location and The author of our second contribution is Victor housing policy development.
region offers. This belief is probably underpinned Mints. He reviews the effects of the financial crisis
by current economic development. According to on the countries of the former Union of Soviet Janet Xin Ge analyses in her article an alternative
the Financial Times, there is little doubt that the Socialist Republics (USSR), e.g. Russia, Kazakhstan, financing model to increase access to housing
most vibrant region of the world is still Asia.1 Kyrgyz Republic, etc. He believes that no financial in Australia. Many households cannot afford a
area was more affected by the financial crisis home due to high house prices in relation to their
However, this welcome economic upswing is than mortgage lending in these countries. Only incomes. Various governmental support schemes
accompanied by certain risks, mainly asset bub- the substantial fiscal resources allocated by local provide only limited relief. In this context, she
bles.2 Elsewhere in the region, notably in China, governments enabled segments of the market to suggests the use of superannuation funds (or
Hong Kong and Singapore, equity markets have survive in several of those countries, while in many super funds) to help the low to moderate-income
surged and property prices are on the rise. For others, mortgage markets completely ceased to households improve their access to home own-
example, property prices in Shanghai (China) exist. This paper argues that the low-level of resi- ership. She finds that with super funds housing
increased 19% from March to July 2009.3 The lience demonstrated by mortgage lending was affordability is likely to increase by 60% for the
People’s Bank of China has already tightened grounded in basic deficiencies of the mortgage low to moderate-income families.
its monetary policy to slow down bank lending. lending model. The paper also argues that while
Whereas Asia is confronted with house price infla- the system was in place, it made housing less In our final article, Ralph Liu suggests the pos-
tion, countries like Mexico or Romania have seen available for low-income individuals rather than sibility of creating a new housing finance system
their mortgage markets falter. Thus, one outcome making it more available for them. based on simplified financial derivatives. A con-
of the crisis is the heterogeneous development ventional legal ownership title includes the right
of mortgage markets worldwide. Our next contribution, which is written by Man to occupy and use the property, also called the
Cho and Kyung-Hwan Kim, expands on the ques- “Shelter Value”, as well as the benefit from price
What does the current situation mean for hous- tion of how to enhance the measurement and rises or the losses of price falls, which would
ing affordability? Which policies and instru- management tools used to control mortgage constitute the “Economic Value”. With a swap
ments are recommended to help low- and default risk so that a country’s housing finance transaction, the economic value of conventional
middle-income groups remain in their homes system can extend its service to a larger number property ownership could be separated from
or ensure access to housing finance? This edi- of marginal borrowers. They relate their findings the shelter value. Ralph Liu believes that this
tion of Housing Finance International aims to to the Korean Mortgage Market. In their view, technique could allow homeowners to better
provide answers to these questions. it offers an interesting case study because of manage the financial risk and return aspects
several unique features of the regulations on of property ownership while maintaining their
The first article, by Marianna Blix Grimaldi, mortgage lending to promote prudency in lend- shelter value at all times.
Daphne Nicolitsas and Moreno Roma, deals with ing and contain house price increases.
the roots and consequences of the Swedish and I hope you will enjoy reading these articles.
Japanese banking crises of the early 1990s, and Wolfgang Amann argues in the fourth article for a Please do not hesitate to make comments or
their effects on the respective national housing contextualised approach towards addressing the suggestions in order to stimulate a wider debate,
markets. The authors approach this topic by housing policy challenges of Central and Eastern which will allow for a broader exchange of ideas
attempting to highlight similarities and diffe- Europe (CEE). Policy makers face a number of and concepts. They are more than welcome!
rences between the experiences of these two important challenges. Firstly, although house prices
very distinct economies, and the lessons that in urban areas are at similar levels to western
policy makers could extract. The article is organ- prices, household incomes are considerably lower.
ised into four sections. The first section reviews Secondly, as the existing housing stock is deterio-
the trigger and the background to the crises in rating, construction levels are insufficient to meet Friedemann Roy4
1
See Financial Times (5 January 2010), “Asia’s recovery star burns brightest”. 4
The Findings, interpretations, statements and conclusions expressed herein are those
2
In this context, see R. Zoellick, “Heed the danger of asset bubbles”, Financial Times, of the editor alone and do not necessarily reflect the views of the International Bank
25 November 2009, page 9. for Reconstruction and Development/The World Bank and its affiliated organizations,
or those of the Executive Directors of The World Bank. The authors of the articles of
3
See www.globalpropertyguide.com, “Strong growth in China’s housing markets”, this edition present their independent views, opinions and assessments and neces-
29 September 2009. sarily do not reflect the views of the World Bank and/or its affiliated organizations,
or those of the Executive Directors of The World Bank.
4 HOUSING FINANCE INTERNATIONAL December 2009