Housing market challenges in Europe and the United States

Ebook Housing market challenges in Europe and the United States present the content: housing market challenges in Europe and the united states; subprime mortgage market and current financial crisis; the rental housing market; housing markets, business cycles and economic policies; fiscal aspects of housing in Europe...

Housing Market Challenges in Europe and the United States This page intentionally left blank Housing Market Challenges in Europe and the United States Any Solutions Available? Edited by Philip Arestis Peter Mooslechner and Karin Wagner Editorial and selection matter © Philip Arestis, Peter Mooslechner and Karin Wagner 2009 Individual chapters © Contributors 2009 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2009 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978–0–230–22903–7 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin A catalogue record for this book is available from the British Library A catalog record for this book is available from the Library of Congress 10 18 17 16 15 14 13 12 11 10 09 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne Contents List of Figures vii List of Tables ix Notes on the Contributors xi Introduction: Housing Market Challenges in Europe and the United States Philip Arestis, Peter Mooslechner and Karin Wagner Housing Markets in Europe and in the USA: What Are the Relevant Issues Today? Peter Mooslechner and Karin Wagner Subprime Mortgage Market and Current Financial Crisis Philip Arestis and Elias Karakitsos Determinants of Homeownership Rates: Housing Finance and the Role of the State Elisabeth Springler and Karin Wagner The Rental Housing Market Dieter Gstach Housing Markets, Business Cycles and Economic Policies Christophe André and Nathalie Girouard European Rental Markets: Regulation or Liberalization? The Spanish Case Montserrat Pareja-Eastaway and María Teresa Sánchez-Martínez Fiscal Aspects of Housing in Europe Guido Wolswijk Towards a New Housing System in Transitional Countries: The Case of Hungary József Hegedüs 10 15 40 60 85 House Price and Other Housing Market Data: A User’s Perspective Anthony Murphy v 109 131 158 178 203 vi Contents 11 Residential Property Price Statistics for the Euro Area and the European Union Martin Eiglsperger 221 12 Housing and Financial Wealth in Austria: What Can Survey Data Tell Us for the Analysis of Financial Stability Issues? Pirmin Fessler, Peter Mooslechner, Martin Schürz and Karin Wagner 239 Index 264 List of Figures 2.1 2.2 2.3 4.1 4.2 4.3 5.1a 5.1b 5.2a 5.2b 5.3a 5.3b 5.4 5.5 5.6a 5.6b 6.1 6.2 7.1 7.2 7.3 7.4 8.1 9.1 9.2 9.3 9.4 9.5 9.6 Real housing investment Mortgage debt outstanding and disposable income Share of variable rate lending in new loans for house purchase and mortgage debt to GDP in 2007 Annual changes in homeownership rates in percentage points, 1997–2006 Selected economies: Supply side allowances to GDP ratio in per cent in 2001 Development of subsidized housing supply and housing permissions and completions in Austria, 1996–2003 Yearly growth rates of real rents in per cent Yearly growth rates of real rents in per cent Yearly growth rates of real rents in per cent Yearly growth rates of real rents in per cent Distribution of disposable household income Distribution of disposable household income Rented market shares by household size Rented market shares by age group Distribution of rent-to-income ratio in per cent Distribution of rent-to-income ratio in per cent OECD real house prices and the business cycle Marginal propensities to consume out of housing wealth and mortgage market indicators Rented housing in several European countries Contracts and rents in Barcelona, 1984–2007 Regulated and unregulated housing, 1962–2007 ‘Disqualified’ regulated housing Housing taxes, 2006 Macroeconomic trends: GDP, CPI, and interest on housing (%) New construction and building permits between 1989 and 2008 House price changes Housing loans, 1989–2008 Housing subsidies, 1998–2007, as per cent of the GDP Household borrowing, 1996–2008 vii 21 27 29 63 69 70 93 93 94 94 99 99 101 102 103 103 111 116 134 144 146 147 164 181 183 183 187 188 190 viii List of Figures 10.1 Channels of transmission of the mortgage and housing crisis 10.2 Various measures of UK house prices 10.3 Various measures of Greater London house prices 10.4 Estimated long-run effects of changes in the credit conditions index 10.5 Simulated real US house prices 11.1 Residential property prices for euro area countries, annual percentage changes 11.2 Residential property prices for non-euro area EU countries, annual percentage changes 11.3 Residential property prices for the euro area at annual and semi-annual frequency, annual percentage changes 12.1 Stock and/or mutual fund share holdings by gross financial wealth decile 12.2 Which sources you rely on when you seek information on financial issues? 203 209 209 215 216 224 225 234 252 257 List of tables 2.1 Housing market indicators 2.2 Timing of maximum correlation 4.1 Introduction and usage of securitization for housing finance in European economies and the USA 4.2 Fixed effects model for ownership rate 4.3 Fixed effects model for ownership rate (incl interest rates) A4.1 Cost of financing – time series A4.2 Fixed effects model with instrumental variables 6.1 House prices in real terms and relative to rents and income 6.2 Short-term and long-term impact of financial and housing wealth on consumption 6.3 Long-term impact of housing equity withdrawal on consumption 7.1 Housing tenure 7.2 Tenure in Spain 7.3 Cost of rented dwellings according to the year of signature 8.1 Main tax categories affecting housing/mortgages in the euro area, 2007 8.2 Overall housing subsidy measures, 1999 A8.1 Tax on imputed rents A8.2 Mortgage interest payments tax deductibility A8.3 Tax on housing capital gains A8.4 Indirect taxes 9.1 Basic indicators of housing conditions in Hungary, 1970–2000 9.2 Housing allowance, 2000–2007 10.1 Simple mix adjusted house price examples 10.2 Start dates of some European house price data 10.3 Various measures of quarterly ln house prices for the UK ix 17 22 67 74 76 79 80 112 115 116 135 144 150 161 165 171 172 173 174 182 196 205 206 210 Pirmin Fessler, Peter Mooslechner, Martin Schürz, Karin Wagner 255 of income and gross financial assets rise One problem in interpreting this spread arises because neither the original loan amount nor the time it was taken out is known This problem is especially relevant if the research is focused on establishing how the size of household debt is influenced by socio-economic characteristics, whereas the size of debt at the time of the survey is relevant in addressing the implications of household debt for financial stability The relatively high share of housing loans in the total debt volume is an indicator of a low financial stability risk, as housing loans are generally secured by the underlying property One housing loan risk factor is the high proportion of foreign currency loans, which presents a quite considerable exchange rate risk to the liabilities of households 12.8 Is financial literacy a precondition of financial stability? Against the background of the current financial and economic crisis the importance of private households’ financial knowledge and skills to deal with everyday financial matters and to make the right choices for their needs was underlined Micro data show that people’s attitudes about money often depend on their education, income and age A higher level of education, income and age tends to go hand in hand with a more positive financial attitude 12.8.1 Cluster analysis on people’s money management capability The cluster analysis of households’ money management capability relies on responses to the question how well respondents keep track of their finances, whether they prefer low-risk saving instruments and whether they tend to overdraw their checking accounts The related responses yielded four clusters: two groups of respondents with generally positive bank account balances, one cluster with basically balanced accounts and a fourth cluster – containing 15 per cent of all respondents – with those people whose accounts are usually overdrawn The households in this last cluster have the lowest financial wealth, the least diversified investment portfolios (primarily passbook savings accounts; 61 per cent hold life insurance policies) and the largest overall volume of consumer loans The cluster analysis confirms that the capability to ensure not to overdraw one’s accounts and to keep track of one’s finances is correlated with age and not with education or income The indicators on which this analysis was based were answers to the questions 256 Housing Market Challenges in Europe and the United States whether respondents put aside money for emergencies, whether they have made individual retirement provisions and whether they would like to be better informed about financial issues The analysis yielded four clusters The first two clusters are characterized by the fact that about 93 per cent of respondents have made private old-age provisions, have a high income and strongly diversified portfolios, which makes the detailed analysis of these two portfolios particularly interesting Moreover, the respondents in these two clusters on average have a relatively high level of education The second cluster also includes respondents which have made considerable equity investments The third cluster (35 per cent of households) encompasses households without private pension schemes (about one-quarter of respondents) The respondents in this cluster have invested lower amounts in all investment categories than respondents in the first two clusters The third cluster contains households with high income and wealth groups together with respondents who preferably take advice from their family and seek out information provided by various advisors Hence, cluster analysis confirmed once more that respondents with a higher level of education and income tend to shop around, not least because wealthier respondents are in a stronger negotiation position In order to classify households based on how they make financial decisions, we used questions on the ownership of different investment instruments (passbook savings account, bonds, stocks, etc.) and the question of whether respondents compare offers provided by different banks Households in the high income cluster have clearly more diversified portfolios An indicator for responsible financial behavior is whether respondents rely on more than one information source in financial matters More than half of the households answered that they primary rely on their home banks’ advice (see Figure 12.2) In the second cluster, almost onethird of respondents rely on advice by their own bank Of all clusters in this area, this cluster has the highest share of over-70-year-olds Cluster analysis thus confirms that loyalty concerning one’s bank is particularly strong among older people 12.9 Conclusions Housing wealth and financial wealth are the major parts in private households’ wealth holdings; and housing wealth is most often used as Pirmin Fessler, Peter Mooslechner, Martin Schürz, Karin Wagner 257 I talk to my financial advisor at my bank 59% 27% I talk to my family I gather information at different banks 22% 20% I talk to friends I rely on information from newspapers I browse the internet for information I get brochures at my bank I talk to independent financial advisors I talk to my colleagues at work I consult with the staff council at my workplace 19% 18% 18% 11% 8% 3% 0% 10% 20% 30% 40% 50% 60% 70% Figure 12.2 Which sources you rely on when you seek information on financial issues?* Note: * Multiple answers were possible Source: OeNB Survey on Financial Household Wealth 2004 (SFHW) collateral The chapter tries to illustrate how micro data can help when analyzing several topics including financial stability issues Logit estimates of both datasets (2008 Household Survey on Housing Wealth (HSHW) and the 2004 Survey on Financial Household Wealth (SFHW)) show that education, age (and, for financial wealth, also net income) are decisive factors for holding these wealth categories It can be shown that housing wealth in Austria is mainly for living and not for transaction purposes Given that only few Austrian households actually hold stocks and that these holdings are concentrated among wealthy households, however, the related risks to financial stability are comparably low The participation in capital market increases in line with financial wealth, net income and the level of education Risk-taking is strongly correlated with wealth The participation rate is highest in the highest wealth decile, in the group with the highest net income, the group with the highest level of education, and in the group of entrepreneurs Our analysis shows that high-income households tend to have more debt than low-income households The risks associated with private debt that could threaten financial stability in Austria are therefore rather small Because of the low levels of debt compared with other countries and owing to the fact that borrowing is concentrated in affluent 258 Housing Market Challenges in Europe and the United States households, the level of household indebtedness in Austria does not pose a threat to financial stability Future efforts directed toward improving financial literacy should pay special attention to the relationship between financial attitudes and actual financial behavior Personal attitudes toward financial issues (e.g., risk orientation, propensity to invest in complex financial products and to shop around, self-confidence in financial matters) are often linked with the level of education, income or age A striking result of the survey is that half of the respondents seldom compare financial services offers As shopping around allows consumers to get better deals, encouraging consumers to so would improve their basis for sound financial decision-making We have shown a very heterogeneous picture of factors determining financial stability We conclude by underlining that household wealth data is of crucial importance for analyzing financial stability Annex Gross financial assets = Current account holdings8 + savings deposits including deposits made under building loan contracts + value of bonds + value of stocks quoted on the stock exchange + value of mutual fund shares (equity funds, bond funds, mixed funds, real estate funds, hedge funds, money market funds) + value of equity investments + accumulated payment of life insurance premiums Net financial assets are defined as gross financial assets excluding consumer loans In the OeNB Survey on Financial Household Wealth 2004 the interview partner was the household head or the household member with the most accurate knowledge about the respective household’s finances, whereas in the OeNB Household Survey on Housing Wealth 2008 questions were put to the owner of the property or the person named in the tenant contract Cluster analysis To cross-check clustering results, we used Ward’s method to establish a hierarchy among respondents and the K-means procedure to Pirmin Fessler, Peter Mooslechner, Martin Schürz, Karin Wagner 259 partition respondents First, the number of clusters was determined with Ward’s hierarchical clustering method; then this number was confirmed by applying the K-means algorithm Notes Financial stability in our understanding is broadly defined in terms of its ability to facilitate economic processes, manage risks, and absorb shocks These percentage shares not add up to 100% as multiple answers are possible (e.g., part of the home was inherited and part of it was bought) A comparison of these data with financial accounts data shows that gross financial assets as recorded in the survey represent about 50 per cent of the financial assets recorded in the financial accounts The degree of consistency differs among investment categories The cross-sectional data from a (static) age distribution must not be interpreted as dynamic across the life cycle at a specific survey date The methods used for the cluster analysis are described in the Annex For reasons of comparability, bonds are not included in this calculation (data are from the 1990s) The precision of the estimated shares weighted for Austria increases in the higher deciles owing to higher participation rates; in the lower deciles, it is very low Overall, the participation rate increases across financial wealth deciles; there is no significant difference in the share of risky assets in total financial assets for those households that hold risky assets Only data sets that could be evaluated fully were used in this analysis A value of zero is used where no assets were reported However, only holdings were counted, as respondents were not asked to provide exact amounts of overdrafts on current accounts The survey did not cover cash holdings After all, whether to include cash in assets is a matter of debate (transaction balances, loss of value and the like) References Albacete, N and K Wagner (2009) How Do Private Households Finance Their Home Equity? 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An Empirical Analysis ECB Working Paper 570, available at: www.ecb.int/pub/pdf/scpwps/ecbwp570.pdf Riiser, M.D and B.H Vatne (2006) Developments in Household Debt An Analysis of Microdata for the Period 1986–2003, in: Norges Bank Economic Bulletin 2/06 Tudela, M and G Young (2005) The Determinants of Household Debt and Balance Sheets in the United Kingdom Bank of England Working Paper 266, available at: www.bankofengland.co.uk/publications/workingpapers/wp266.pdf Van Els, P., W van den End and M van Rooij (2003) Financial Behaviour of Dutch Households: Analysis of the DNB Household Survey 2003, DNB Research Report 744, available at: www.dnb.nl/dnb/home/file/744_tcm13-38874.pdf Pirmin Fessler, Peter Mooslechner, Martin Schürz, Karin Wagner 263 Van Rooij, M (2002) Financial Vulnerability of Mortgagors and Mortgagees Research Memorandum WO 706.E, De Nederlandsche Bank Vatne, B.H (2006) Developments in Household Debt, An Analysis of Microdata for the Period 1986–2003, IFC Bulletin 2/2006, Irving Fisher Committee on Central Bank Statistics ˙ Zochowski, D., Zaja˛czkowski, S (2006) The Distribution and Dispersion of Debt Burden Ratios Among Households in Poland and its Implications for Financial Stability, MPRA Paper 692, University Library of Munich, Germany Index capital gains anti-speculation 167 house prices 45, 135 imputed rent 113 taxation 72, 117, 118, 163, 166, 167, 173 central banks asset prices 3, 15, 31–2, 34, 36 interest rates securitization 54 subprime mortgage market 47–8 Collateralized Debt Obligations (CDOs), subprime mortgage market 2–3, 41, 46–7 commodities, bubble 3, 40–1, 48–9, 53 consumption equity withdrawal (HEW) 6, 105, 109 housing wealth 6, 19–20, 22–3 interest rates 113 marginal propensity to consume (MPC) 19, 22, 116 CPI-inflation 3, 40, 48, 53 Credit Default Swaps (CDSs), risk 3, 41 credit markets credit rating institutions 47 credit scoring 30 crisis see financial crisis liberalization 19–20 André, Christophe xi, 6–7, 109–30 Arestis, Philip xi, 1–14, 40–59 Asian–Russian crisis (1997–8) 3, 40, 51 asset backed securities financial crisis 49 financial engineering 57 forms 3, 41 residential mortgage-backed securities (RMBS) 23, 29–30, 49, 66–8, 117, 120, 125 securities and derivatives 41 see also securitization asset prices borrowing 31 bubbles 6, 30, 31, 32, 33, 48, 120–4 central banks 3, 15, 31–2, 34, 36 correction 31 cycles 31 inflation interest rates 113–14 monetary policy 6, 31, 32, 34–5, 120–4 shock 32, 113 stability 32 Austria data 242–6 descriptive statistics 242–6 financial investments 249–52 homeownership rates 243–4, 248 housing wealth 13–14, 239–63 savings 252–3 data house prices see house price statistics housing investment 21 housing markets 10–11, 203–20 rental housing 91 stability issues 239–63 Bank of Japan, liquidity easing 41 Bear Stearns 48, 125 Bernanke, Ben 3, 40 business cycles house price volatility 20–2 housing investment 20–2 housing markets 6–7, 109–30 Eastern Europe housing regimes 178–80 see also Hungary 264 Index 265 Eiglsperger, Martin xi, 221–38 equity withdrawal (HEW) consumption 6, 105, 109 credit standards 30 mortgage markets 22, 23, 158, 159 OECD countries 115–17 European Union (EU) fiscal policy 8–9, 158–77 house prices 12–13, 62, 221–38 housing system 7, 131–57 rental housing 133–6 Fannie Mae 48, 49, 56, 60, 67, 68, 125 Fessler, Pirmin xi, 13–14, 239–63 finance, housing see financial crisis financial crisis contagion 47, 49 current economic policies 50–2 housing bubbles 40, 61–2 lessons 53–6 liberalization 2, 42–4 monetary policy 3, 50–1 preceding observations 61–2 quantitative effects 52–3 subprime mortgage market 2–3, 40–59 United States 49–50 financial innovation assets see asset backed securities excessive lending financial structured products 2–3 future income 13 liberalization 2, 40, 41, 44–50 monetary policy 24, 35, 40 portfolio behaviour 14 subprime mortgage market 2, financial intermediaries indirect holdings 14 securitization 29–30, 66 financial liberalization see liberalization financial stability asset prices 32 automatic stabilizers 167 financial literacy 255–6 household debt 253–5 prices 50 shock 158 survey data 239–63 fiscal policy financial crisis 50 housing markets 8–9, 158–77 structural fiscal measures see also taxation Freddy Mac 48, 49, 60, 68, 125, 307 Girouard, Nathalie xi, 6–7, 109–30 Greenspan, Alan 3, 33, 40, 51 Gstach, Dieter xii, 5–6, 85–108 Hegedüs, Jószef xii, 9–10, 178–202 homeownership rates academic literature 63–6 Austria 243–4, 248 determinants 3–4, 60–84, 247–8 developments 16–18, 63–6 house prices 64 housing bubbles housing finance 60–84 interest rates 63–4 sociological/demographic factors 64 tax incentives 4, 16, 26, 64, 65, 69, 72–8, 118 variation 16–18 house price statistics mix adjusted indices 206–10 mix adjusted/disaggregated indices 204–6 assessment of data 232–3 available data 223 compilation of indicators 223–6, 232–4 coverage 226–7 data set 223–33 data sources 223–6 European Union (EU) 12–13, 221–38 frequency 226 market data 10–11, 203–20 modeling 210–16 prices 228, 236–7 samples 228–32 timeliness 227 266 Index house price volatility business cycles 20–2 economic implications structural reduction 9, 167–8 taxation 119 variation 16–18 wealth effects 18–20 house prices capital gains 45, 135 European Central Bank (ECB) analyses 12, 221–38 European Union (EU) 12–13, 62, 221–38 homeownership rates 64 mortgage markets 22–4 rents compared 112 role 221–3 shock 61, 86, 115, 119, 126, 213 Spain 144–5 housing bubbles financial crisis 40, 61–2 homeownership rates monetary policy 6–7 housing expenses, taxation 2, 6, 8–9, 72–3 housing finance competition 2, 17, 28 contract saving systems 66 globalization homeownership rates 60–84 household wealth housing markets 26–30 international dimension 29–30 liberalization 1, 4, 28 market-based systems modes 66–8 mortgage see mortgages recommendations 64–5 role of state 66–72 securitized see securitization subprime see subprime mortgage market vulnerabilities 61–2 housing investment business cycles 20–2 data 21 housing markets business cycles 6–7, 109–30 challenges 1–14 data 10–11, 203–20 economic policies 6–7, 109–30 fine-tuning 168–70 fiscal instruments 8–9, 159–74 historical perspective 110–13 housing finance 26–30 imputed rent 25, 113 indicators 17 international dimension 29–30 liquidity extraction macroeconomics 16–24 monetary policy 2, 30–5, 113–16 OECD countries 109–30 regulation 25–6 relevant issues 15–39 role of state 68–72 subsidies 169 taxation 166–70 transaction costs 118 housing sector diversity 132–6 economic development housing wealth academic literature 240–2 Austria 13–14, 239–63 cluster analysis 249–50 collateral value 20 financial investments 249–52 indebtedness 26–9, 253–4 money management 255–6 private consumption 6, 19–20, 22–3 structural factors 117–18 taxation 118–20 withdrawal see equity withdrawal Hungary housing affordability 195–6 housing policy 184–6 housing program 186–91 new housing system 9–10, 178–202 post-socialism 196–8 recession 180–4 rental housing 192–5 social sector 10, 192–5 imputed rent capital gains 113 CPI 91, 104 housing markets 25, 113 Index 267 indexation 90–1 taxation 8, 24–5, 72, 78, 91, 160–2, 171 indebtedness housing wealth 26–9, 253–4 private households 62 interest, mortgage relief/tax deduction 2, 9, 24–6, 152, 160, 162–3, 167, 172, 187 interest rates asset prices 113–14 central banks consumption 113 homeownership rates 63–4 LIBOR 46 short-term nominal rates 28 United States 48 Karakitsos, Elias xii, 40–59 liberalization credit markets 19–20 debt crises 43 development policy 43 efficient markets 42 financial crisis 2, 42–4 financial innovation 2, 40, 41, 44–50 housing finance 1, 4, 28 rental housing 7–8, 131–57 sequencing 43 theoretical debate 137–41 life cycle model 19, 114, 246 liquidity easing 41 macroeconomics housing markets 16–24 New Consensus 42 rental housing 85–108 marginal propensity to consume (MCP) 19 microeconomic data 239 monetary policy asset prices 6, 31, 32, 34–5, 120–4 changing financing structures 33–5 conflicting approaches 32–3 efficiency 6–7 financial crisis 3, 50–1 housing markets 2, 30–5, 113–16 shock 2, 22 transmission 113–16 Mooslechner, Peter xii, 1–14, 15–39, 239–63 mortgage interest, tax deduction 2, 9, 24–6, 152, 160, 162–3, 172, 187 mortgage markets characteristics 22–3 house prices 22–4 variety 23 mortgages down payments 17 foreign currency 29 indebtedness 26–9 liberalization loan to income (LTI) ratios 11, 205, 217 loan to value (LTV) ratios 6, 11, 17, 23, 26, 27, 30, 73, 117, 119, 205, 211, 215, 217 long-term fixed rate mortgages 2, 28 product variety 23 subprime see subprime mortgage market variable rates 28 Murphy, Anthony xii, 10–11, 203–20 ownership, rates see homeownership rates Pareja-Eastaway, Montserrat xii, 7–8, 131–57 policies development 43 fiscal see fiscal policy Hungary 184–6 monetary see monetary policy prices assets see asset prices commodities 3, 40–1, 48–9, 53 housing see house prices stability maintained 50 volatility see house price volatility provisioning 7, 124, 125, 127 268 Index regulation banking 124 housing markets 25–6 rental housing 7–8, 131–57 securitization 126 theoretical debate 137–41 rental housing academic literature 86–91 contracts 8, 140, 144–5, 148–9, 152 data issues 91 European Union (EU) 133–6 Hungary 192–5 macroeconomics 85–108 market share 96–7 markets 5–6, 18, 20, 85–108 OECD countries 118 price-to-rental ratio 95, 121 regulation/liberalization 7–8, 131–57 rent control 137–41, 147–50 rent-to-income ratio 95–6, 102–4, 121 rental rates 92–6 renters/owners 98–102 social sector 7, 18, 136, 192–5 Spain 7–8, 141–54 stylized facts 98–104 vacancy rates 97–8 see also tenure rents house prices compared 112 imputed see imputed rent risk Credit Default Swaps (CDSs) 3, 41 financial investments 249–52 financial system supervision 124–6 logit analysis 250–2 subprime mortgage market 23 Sánchez-Martínez, María Teresa xiii, 7–8, 131–57 Schürz, Martin xiii, 13–14, 239–63 securitization central banks 54 credit standards 30 financial crisis 35–6 financial engineering 57 financial intermediaries 29–30, 66 international dimension 2, 29–30 regulation 126 residential mortgage-backed securities (RMBS) 23, 29–30, 49, 66–8, 117, 120, 125 subprime mortgage market 23, 30, 45 usage 66, 67 see also asset backed securities shock absorbers 150, 168 asset prices 32, 113 financial stability 158 house prices 61, 86, 115, 119, 126, 213 impact 13, 240, 252 monetary policy 2, 22 supply 191 social sector Hungary 10, 192–5 rental housing 7, 18, 136, 192–5 Spain balanced system 150–2 contracts 8, 144–5, 148–9, 152 economic growth 141 house prices 144–5 housing policies 143–7, 150–2 regulated/unregulated dwellings 146–7 rent control 147–50 rental housing 7–8, 141–54 subsidies 145–6, 151 supply/demand 145–6, 150 tenure 143–7, 150–2 transition 145–6 special investment vehicles (SIVs) 44–7, 54 Springler, Elisabeth xiii, 3–4, 60–84 stock markets indirect participation 14 wealth 19 subprime mortgage market central banks 47–8 Collateralized Debt Obligations (CDOs) 2–3, 41, 46–7 default risk 23 Index 269 financial crisis 2–3, 40–59 financial innovation 2, refinancing 45 securitization 23, 30, 45 subsidies housing decisions housing markets 169 interest rates 9, 10 national differences 2, 24 second homes 5–6 Spain 145–6, 151 see also taxation taxation automatic stabilizers 167 capital gains 72, 117, 118, 163, 166, 167, 173 categories 161 deduction 2, 9, 24–6, 152, 160, 162–3, 172, 187 housing expenses 2, 6, 8–9, 72–3 housing markets 166–70 housing wealth 118–20 imputed rent 8, 24–5, 72, 78, 91, 160–2, 171 indirect 174 regulatory change 25–6 stamp duties 167, 169 tax incentives 4, 16, 26, 64, 65, 69, 72–8, 118 value added tax 163–6 see also fiscal policy tenancies, structures 16 tenure choice 17, 85, 91, 95 duration 92 European housing systems 131–6 residual income 100 Spain 143–7, 150–2 7, United Kingdom, mix adjusted house price indices 208–10 United States bail outs 48 financial crisis 49–50 interest rates 48 loan portfolios 44 long-term fixed rate mortgages value added tax 163–6 Wagner, Karin xiii, 1–14, 15–39, 60–84, 239–63 Washington Consensus 42 wealth house price volatility 18–20 houses see housing wealth stock markets 19 Wolswijk, Guido xiii, 8–9, 158–77 ... recession affecting both industrialized and emerging markets Given similar Housing Market Challenges in Europe and the United States developments in the housing markets in numerous European economies... general increase in homeownership and a fall in size and quality of the rented dwellings The characteristics of the rented markets Housing Market Challenges in Europe and the United States and their.. .Housing Market Challenges in Europe and the United States This page intentionally left blank Housing Market Challenges in Europe and the United States Any Solutions Available?