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Why German real estate market can keep sound development
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Why German real estate market can keep sound development
Feb. 16, 2014, I wrote article Why German Economy Can Fly Against Economic Recession and indicate that: "Germany may be one of the few rich countries relying on the hard working rather than that of natural resources, which has attracted great many people to explore the secrets. However, most of them have focused on the macro policy with ignoring the micro details." "I believed that those are easily despised or neglected by others, are just precisely the most important. They are the true reasons or may be called as DNA that Germany has been success outstanding."
Housing Markets, Financial Stability and the Economy - IMF
Blog: Era of Benign Neglect of House Price Booms is Over
New Global Housing Watch Throws Spotlight on Booms and Busts
As prepared for delivery
1. Let me begin by thanking the Bundesbank and the German Research Foundation for organizing this conference with us.
2. I will make three points in my remarks:
- First, housing is an essential sector of the economy but also one that has been the source of vulnerabilities and crises.Hence, while the recent recovery in global housing markets is a welcome development, we need to guard against another unsustainable boom.
- Second, detecting over-valuation in housing markets is still more of an art than a science. Broad measures, such as house price to rent ratios, provide a first pass. But detailed analysis and judgment are needed to make a call about overvaluation.
- Third, the policy toolkit to manage housing booms is still under construction. A variety of tools have been used and the evidence suggests some short-run success. But more analysis and sharing of experience are needed on what works and what doesn’t. Conferences of this kind are useful in adding to our stock of knowledge.
Role of the housing sector
3. Let me elaborate on these three points, beginning with the role of the housing sector. Food, clothing, shelter: these are traditionally thought of as basic needs of mankind; so the housing sector satisfies an essential need. Housing is also of course an important component of investment. And in many countries housing makes up the largest component of wealth. For instance, in the United States, real estate account for roughly a third of the total assets held by the nonfinancial private sector. The majority of households tend to hold wealth in the form of their homes rather than in financial assets: in France, for example, less than a quarter of households own stocks but nearly 60 percent are homeowners.
4. Housing also plays other key roles; for instance, mortgage markets are important in the transmission of monetary policy. Adequate housing can also facilitate labor mobility within an economy and help economies adjust to adverse shocks. In short, a well-functioning housing sector is critical to the overall health of the economy. And as economies develop, we expect a corresponding deepening and growth of housing markets.
5. Despite its importance, however, the housing sector has not received adequate attention from macroeconomists. As Ed Leamer once noted, leading textbooks in the field often did not have any mention of the housing sector. Of course, all that has changed since the Great Recession. The bursting of the real estate bubble in the United States was followed by the deepest global downturn since the Great Depression. It reminded people of the collateral damage that can be triggered by housing collapses.
6. Indeed, all through history, housing booms and busts have quite often been detrimental to both financial stability and the real economy. Many major episodes of banking distress have been associated with boom-bust cycles in property prices. IMF research shows that of the nearly 50 systemic banking crises in recent decades, more than two thirds were preceded by boom-bust patterns in house prices. The cost of resolving housing crises can be very high—in the case of Ireland, for instance, government bailouts of banks from the housing collapse ate up 40 percent of the country’s GDP. In contrast to housing cycles, boom-bust cycles in stock prices are much less likely to trigger systemic banking crises.
7. Even when housing busts do not have a large financial stability impact, they can affect the real economy. Research shows that recessions in OECD countries are more likely given a house price bust. Such recessions also tend to be much deeper and generate more unemployment than normal recessions. In short, there is abundant evidence that housing cycles can be a threat to financial and macroeconomic stability. Hence it is crucial to keep an eye on current housing market developments to keep them from going through another boom-bust cycle.
Detecting overvaluation in housing markets
8. So where do housing markets stand today? House prices and residential investment declined in many countries at the onset of the Great Recession. Since then, there has been a rebound. Overall, house prices are inching up again: the IMF’s Global House Price Index has increased for the last seven quarters in a row. Over the past year, 33 out of 51 countries in our index showed increases in house prices. In some cases house prices are recovering from a sharp correction during the Great Recession. In other cases, house prices have continued an upward march with only a bit of moderation during the Great Recession.
9. Have these developments moved house prices closer to or further away from economic fundamentals? One common first pass attempt to answer this question is by looking at long-run valuation ratios. Theory asserts that house prices, rents, and incomes should move in tandem over the long run. If house prices and rents get way out of line, people would switch between buying and renting, eventually bringing the two in alignment. Similarly, in the long run, the price of houses cannot stray too far from people’s ability to afford them––that is, from their income. The ratios of house prices to rents and incomes can thus provide an initial check on whether house prices are out of line with economic fundamentals.
10. What does the evidence show? Among the OECD countries, these ratios remain well above the historical averages for a majority of countries. This is true for instance for Australia, Belgium, Canada, Norway and Sweden. This evidence provides a broad indication of housing market valuation. But one cannot assess overvaluation from this evidence alone. Whereas the long-run relationships do generally act as an anchor, house prices often drift away from them strongly and for long periods. Demand momentum leads to increases in house prices, particularly in situations where the supply of housing cannot be adjusted quickly due to geographical or other constraints. Judgments about housing valuation thus require supplementary information, such as credit growth, household indebtedness, lender characteristics, and the method of financing.
11. Of all these potential indicators of the risk of a boom-bust cycle, IMF research suggests it is particularly important to monitor credit growth. We find that there is a distinguishing feature of real estate booms that go ‘bad’: this feature is the coincidence between the housing boom and the rapid increase in leverage and exposure of households and financial intermediaries. During the global financial crisis, nearly all the countries with “twin booms” in real estate and credit markets—21 out of 23 countries that we analyzed—ended up suffering from either a financial crisis or a severe drop in GDP growth relative to the country’s pre-crisis performance. In contrast, of the seven countries that experienced a real estate boom but not a credit boom, only two went through a systemic crisis and these countries, on average, had relatively mild recessions.
12. IMF staff are thus increasingly paying attention to credit growth, along with several other country-specific features of the housing market. In recent months, IMF staff have provided detailed judgments about housing markets for Australia, Israel and Canada, which are all countries where the broad measures of valuation are high. We have also provided assessments for many emerging market economies in Asia and Latin America, where mortgage credit and house price growth remain strong, and house prices in metropolitan areas show signs of overheating. In some cases, this more detailed look suggests much more modest overvaluation than indicated by the house price to income and house price to rent ratios. One example of this is Belgium, where the IMF concluded that despite the high valuation ratios, risks of a sharp correction of real estate prices appear contained. These country-specific factors for housing cycles suggest that the policy response cannot be ‘one size fits all’.
Constructing a policy toolkit
13. With that, let me move to the third—and last—part of my remarks: the role of policies to contain housing booms. At the outset, let me note that this is part of a broader discussion of the appropriate role for monetary policy in the ‘new normal’. While many aspects of this role remain under active discussion, on thing is clear: monetary policy will have to be more concerned than it was before with financial stability and hence with housing markets. The era of ‘benign neglect’ of house price booms is over.
14. That said, regulation of the housing sector involves a complex set of policies. The noted economist Avinash Dixit suggested we use the acronyms “MiP, MaP, MoP” to remind ourselves of the set of policies. ‘MiP’ stands for microprudential policies, which of course aim to ensure the resilience of individual financial institutions. Such policies are necessary for a sound financial system but may not be sufficient. Sometimes, actions suitable at the level of individual institutions can destabilize the system as a whole. Hence we also need not just ‘MiP’ but ‘MaP’, that is, macroprudential policies aimed at increasing the resilience of the system as a whole.
15. The main macroprudential tools that have been used to contain housing booms are limits on loan-to-value (LTV) ratios and debt-to-income (DTI) ratios and sectoral capital requirements. Limits on LTV ratios cap the size of a mortgage loan relative to the value of a property, in essence imposing a minimum down payment. Limits on DTI ratios restrict the size of a mortgage loan to a fixed multiple of household income. The hope is to thereby contain unaffordable increases in household debt. Such limits have long been in use in some economies. For example, Hong Kong SAR has operated an LTV cap since the early 1990s and introduced a DTI cap in 1994. In Korea, LTV limits were introduced in 2002 and DTI limits in 2005. During and after the global financial crisis, over 20 advanced and emerging economies all over the globe have followed the example of Hong Kong SAR and Korea.
16. Evidence thus far suggests that these measures are somewhat effective in cooling off both house prices and credit growth in the short run. They are able to break the financial accelerator mechanism that otherwise leads to a positive two-way feedback between credit booms and housing booms. But more fine tuning of these measures is needed. Macroprudential measures need to take into account the ability of market participants to circumvent some of the limits on leverage. In some countries, such as in Canada, LTV limits usefully distinguish between owner-occupied vs. investor mortgages.
17. Another macroprudential tool is to impose stricter capital requirements on loans to a specific sector such as real estate. This forces banks to hold more capital against these loans, discouraging heavy exposure to the sector. In many advanced economies such as Ireland and Norway, capital adequacy risk weights were increased on mortgage loans with high LTV ratios. Sectoral capital requirements have also been used in a number of emerging markets such as Estonia, Peru, and Thailand. Evidence suggests that while this tool increases resilience from additional buffers, its ability to curb credit growth is mixed. Some IMF work suggests that higher capital requirements on particular groups of mortgage loans have some success in curbing house price growth in countries like Bulgaria, Croatia, Estonia, and Ukraine.
18. There are a number of reasons why higher capital requirements may be less effective in containing credit growth. First, when banks hold capital well above the regulatory minimum, lenders may not need to make any change in response to increases in risk weights. This often happens during housing booms when policymakers hope the tool to be most effective. Second, when lenders compete intensely for market share, they may internalize the costs of higher capital requirements rather than impose higher lending rates.
19. Macroprudential tools may also not be effective to target housing booms that are driven by the shortage of housing or by increased housing demand from foreign cash inflows that bypass domestic credit intermediation. In such cases, other tools are needed. For instance, stamp duty has been imposed to cool down rising house prices in Hong Kong SAR and Singapore. Evidence shows that this fiscal tool did reduce demand from foreigners who were outside of the LTV and DTI regulatory perimeters. In other instances, high house prices could reflect supply bottlenecks, and hence the effectiveness of demand-focused instruments may be limited. In such cases, the mismatches should be fundamentally addressed by measures to increase the supply of housing.
20. Along with micro and macroprudential policies, we need ‘MoP’: monetary policy. It is often said using policy interest rates is a blunt tool for containing house price booms. But as I noted earlier, housing booms have often coincided with a generalized private credit boom. This suggests that monetary policy could be an important tool in many cases in support of macroprudential policies. It is true, however, that in many relevant cases at the moment, policy interest rates have to remain low to support economic recovery.
Conclusion
21. Let me conclude. Housing booms have different characteristics across countries and time periods. What is common is that when the bust comes, it very often damages financial stability and the real economy. The tools for containing housing booms are still being developed. The evidence on their effectiveness is only just starting to accumulate. The interactions of various policy tools can be complex. But all this should not be an excuse for inaction. The interlocking use of multiple tools might overcome the shortcomings of any single policy tool. We need to move from “benign neglect” to an “all of the above” approach when it comes to policy choices.
22. It is only by maintaining an open dialogue on these issues that we will gain a solid understanding of how policies can contain housing booms. International coordination is also essential, since housing booms in one country can be fed by credit market developments abroad. The IMF intends to do its part. As I mentioned, assessments of housing markets are becoming a regular feature of our country reports. We also report on housing markets through our flagship publications, the World Economic Outlook and the Global Financial Stability Report, as well as through other reports to our Executive Board. We are working with other agencies to improve housing statistics. Next week, we are launching a new webpage where all this work will be given a home. I encourage you to visit the new Global House Watch page on imf.org over the coming weeks and see what we have to offer and to tell us how to do better.
23. The IMF is also contributing to the sharing of cross-country experiences through regular consultations with policymakers and experts. We held a successful conference last November, co-organized with the Federal Reserve Bank of Dallas, on housing issues. And I have no doubt that this conference will be just as successful. Thank you.
In World's Best-Run Economy, House Prices Keep Falling -- Because That's What House Prices Are Supposed To Do
Eamonn Fingleton ContributorA sharp eye on media bias, official propaganda, and globaloney.
Opinions expressed by Forbes Contributors are their own.
It’s just a fact. Many Germans can’t be bothered to buy a house.
The country’s homeownership rate ranks among the lowest in the developed world, and nearly dead last in Europe, though the Swiss rent even more. Here are comparative da
And though those da
This may seem strange. Isn’t home ownership a crucial cog to any healthy economy? Well, as Germany shows—and Gershwin wrote—it ain’t necessarily so.
In Spain, around 80% of people live in owner-occupied housing. (Yay!) But unemployment is nearly 27%, thanks to the burst of a giant housing bubble. (Ooof.)
On
Of course, none of this actually explains why Germans tend to rent so much. Turns out, Germany’s rental-heavy real-estate market goes all the way back to a bit of extremely unpleasant business in the late 1930s and 1940s.
The war
Rollerskating in Essen, February 1949.(AP Photo)
By the time of Germany’s unconditional surrender in May 1945,20% of Germany’s housing stock was rubble. Some 2.25 million homes were gone. Another 2 million were damaged. A 1946 census showed an additional 5.5 million housing units were needed in what would ultimately become West Germany.
Germany’s housing wasn’t the on
And don’t forget, the political situation in post-war Germany was still quite tense. Leaders worried about a re-radicalization of the populace, perhaps even a comeback for fascism. Communism loomed as an even larger threat, with so much unemployment.
West Germany’s first housing minister—a former Wehrmacht man by the name of Eberhard Wildermuth—on
A housing program would simultaneously put people back to work and reduce the stress of the housing crunch. Because of such political worries—as well as genuine, widespread need—West Germany designed its housing policy to benefit as broad a chunk of the population as possible.
The rise of renting
A quonset hut village in Berlin, January 1946.(Getty Images/Keystone)
Soon after West Germany was established in 1949, the government pushed through its first housing law. The law was designed to boost construction of houses which, “in terms of their fittings, size and rent are intended and suitable for the broad population.”
It worked. Home-building boomed, thanks to a combination of direct subsidies and generous tax exemptions available to public, non-profit and private entities. West Germany chopped its housing shortage in half by 1956. By 1962, the shortage was about 658,000. The vast majority of new housing units were rentals. Why? Because there was little demand from potential buyers. The German mortgage market was incredibly weak and banks required borrowers to plunk down large down payments. Few Germans had enough money.
Why Germany?
It’s worth noting that Germany wasn’t the on
Why? The answer seems to be that Germans kept renting because, in Germany, rental housing is kind of nice.
Economists think German housing policy struck a much better balance between government involvement and private investment than in many other countries. For instance, in the UK, when the government gave housing subsidies to encourage the building of homes after the war, on
Britain also imposed stringent rent and construction cost caps on developers of public housing. Under those constraints, housing quality suffered. Over time, the difference between publicly and privately financed construction became so glaring that rental housing—which was largely publicly financed—acquired a stigma. In other words, it became housing for poor people.
Germany also loosened regulation of rental caps sooner than many other countries, according to economist Michael Voightl?nder, who has written extensively about Germany’s housing market. By contrast in the UK, harsher regulation on rented housing stretched well into the 1980s, pushing landlords to cut back on maintenance and driving the quality of housing down still further.
Cheap rents
Of course, all that policy-design detail is interesting. But there might be a simpler explanation for the popularity of renting in Germany. For on
Renter-friendly regulations
Why is renting cheap in Germany? Well, even though the country’s policies might have been slightly more balanced than in other countries, its rental market is still robustly regulated, and the regulations are quite favorable to renters. (Given the strong political constituency renters represent in Germany, this shouldn’t be too surprising.) For example, German law allows state governments to cap rent increases at no more than 15% over a three-year period.
Tax treatment
New supply will be coming on
There’s another pretty simple reason Germans are less likely to own houses. The government doesn’t encourage it. Unlike high-homeownership countries like Spain, Ireland and the US, Germany doesn’t let homeowners deduct mortgage-interest payments from their taxes. (There’s more on the structure ofEuropean tax systems here.) Without that deduction, the benefits of owning and renting are more evenly balanced. “Both homeowners and landlords in Germany are barely subsidized,” wrote Voightl?nder in a paper on low homeownership rates in Germany.
Those regulations, a solid supply of rental housing, and the fact that German property prices historically rise very slowly —that’s a whole other story—mean German rents don’t rise very fast. And because on
A number of other elements contribute too, but it’s tough to disentangle what is cause and what is effect. For example,German banks are quite risk-averse, making mortgages harder and more expensive to get. Others argue that the supply of rental housing might be higher in Germany because of its decentralized, regional approach to planning. (The UK is much more centralized.)
Is Germany just better at housing?
Not necessarily. It’s not as if Germans spend a lot less of their pay on housing. The da
But given the economic spasms suffered in house-crazy economies such as the United States, Spain and Ireland in recent years, the German approach to housing looks pretty good right now—even if, before the crash, the low homeownership rate was seen as an albatross around Germany’s economic neck.
And German people clearly like how their system of housing works. According to the OECD, more than 93% of German respondents tell pollsters they’re satisfied with their current housing situation. That’s on
Read This Next: Why Germans pay cash for almost everything
The German real estate market – cause for concern?
Speech delivered to Haus & Grund Deutschland
https://www.bundesbank.de/Redaktion/EN/Reden/2015/2015_01_28_dombret.html
1 Introduction
Dear President Kornemann,
ladies and gentlemen
It's a great pleasure for me to speak to you today. I gladly accepted your invitation to Berlin given the important influence that you – along with the German tenants' association "Deutscher Mieterbund" – have on the German real estate market. This is the first time I have taken part in your panel discussion, although I did once address the annual meeting ofHaus & Grund in Frankfurt at the invitation of Mr Conzelmann.
I am therefore pleased to have this opportunity to explain the Bundesbank's perspective on the German real estate market. Let us begin by taking a look at the economic situation in general – after all, economic conditions impact strongly on the real estate markets.
2 German economy in good shape
The German economic situation is not as bad as some might think. On the contrary, the German economy remains in good shape. Enterprises in Germany have their costs under control, their debt is not particularly high, and they have an attractive range of products to offer the global markets. Moreover, German economic activity is supported by consumption. Unemployment is low, households are not burdened by excessive debt and real wages are rising appreciably owing to low inflation.
In our December forecast we expect Germany’s real gross domestic product to rise by 1.0% this year and 1.6% next year. However, the price of oil has fallen sharply since we prepared that forecast. If oil prices persist at their current low levels, economic growth could prove to be markedly higher this year and next, since the low price of oil has the effect of a small stimulus package.
At the same time, we have for quite a while now been witnessing very low inflation rates, both in Germany and throughout the euro area. And we can expect them to continue for some time to come. This undoubtedly poses a serious challenge for monetary policymakers. After all, we seek to achieve for the euro area inflation rates of below but close to 2% over the medium term. To help us move closer to this target, the ECB Governing Council last Thursday adopted a programme for the purchase of government bonds.
As you know, the Bundesbank takes a critical view of this government bond purchase programme. In our opinion, monetary policymakers are not under any acute pressure to act, as the low inflation rate is mainly attributable to falling energy prices. For the next two years, we are expecting inflation to pick up gradually; certainly, there is no sign of deflation.
What is more, government bond purchases are not simply a monetary policy instrument like any other where the euro area is concerned. They entail risks which we believe are not outweighed by the expected effects. At least the ECB Governing Council has agreed on a number of constraints to curb balance sheet risks, so that there will only be joint liability for a small portion of the programme. This will mitigate at least some of the problems which government bond purchases entail.
However, this additional monetary policy easing could have undesired side-effects. For instance, the low interest rates could encourage many investors, in their search for yield, to turn to assets they previously avoided due to the associated risks. This makes the emergence of price bubbles more likely, which could cause problems for the stability of the financial system.
And the real estate market is one of those markets where a search for yield can lead to exaggerations. That's why it is worth taking a closer look at this market.
3 Real estate markets – an important part of the economy
Price bubbles are always especially problematic when the purchase of the asset is financed, above all, through credit. Real estate is a case in point. Residential mortgage loans account for 43% of all loans to the private sector in Germany.
Property prices and lending can develop mutually reinforcing, destabilising feedback effects. When prices in the real estate market rise, banks – in the assumption that this trend will continue – may grant additional credit, fuelling price increases further. Of course, that only goes well until the bubble finally bursts.
The faster and lower prices then fall, the more loans cannot be repaid. This compromises the banks' profits and stability – and when the banks sneeze, the whole economy catches a cold. The crises affecting other countries in recent years have made this patently clear.
Which is why we are watching the real estate market very closely indeed. And this begs the question: do we see a price bubble in the German real estate market? Is there cause for concern?
4 The current situation in the real estate market – no bubble
Three different circumstances would have to coincide for a price bubble to form in the real estate market.
- First, a self-sustaining increase in prices which leads to prices that are no longer justified by economic fundamentals
- Second, excessive growth in mortgage lending
- Third, an easing of banks' credit standards for mortgage loans
Let us then consider the threat of a price bubble by examining these three ingredients.
The first question is: do we see an excessive increase in prices? All in all, price dynamics in Germany over the past 20 years have been moderate compared with the rest of the euro area. However, we have seen prices climb fairly steeply in some parts of Germany since 2010 – although the rise in prices did slow down slightly in 2014.
Since 2010, prices have risen by an average of 7% per year in Germany's seven largest cities. Housing prices have increased in medium-sized towns and cities, too, although only by just over 5% per year. The equivalent figure for Germany as a whole is 3%. What we are seeing, then, are marked regional disparities with regard to price increases.
Does that add up to a price bubble? For Germany as a whole, the answer is no. For the years 2010 onwards, we cannot identify any growing, substantial overvaluation of housing. The rise in prices reflects, at least in part, a catching-up process following a period of weak price growth that persisted for quite a number of years.
However, we assume that residential properties were probably overpriced by as much as 20% in large and medium-sized towns and cities up to and including 2013, while overpricing in the seven major cities was probably even somewhat more pronounced in 2013. Price dynamics in the German housing market have, however, weakened appreciably.
To sum up: property price developments present a mixed picture, but the bottom line is that it's not particularly worrying.
What about the second ingredient for a property price bubble: lending? First of all, it has undoubtedly become easier to finance a property purchase thanks to high liquidity levels and low interest rates. Today it's possible for investors to obtain funds at very favourable conditions over a very long period. The weighted average interest rate for new loans over all maturities is 2.3%. Another factor is the low returns on alternative investments, which are encouraging some to seek a crisis-proof, ostensibly safe and higher-yielding investment – turning real estate into what has been dubbed "concrete gold". Yet investors should always bear in mind that higher yields are accompanied by higher risks.
Thus, the volume of mortgage credit to households has risen steadily since 2010, albeit initially at a moderate pace. In November 2014, year-on-year growth was just shy of 2?%, and gathered pace in the last quarter in particular – in Germany even more so than in the euro area.
On the whole, however, mortgage loans have not risen excessively. Purely in terms of volume, banks' vulnerability has increased only slightly. Which brings us to the third ingredient of a price bubble: the credit standards by which mortgage loans are granted.
Is the risk incurred by banks with new lending greater today than it was a few years ago? A survey of 116 selected German banks conducted by banking supervisors provides a more detailed picture. The survey in question focuses on 15 towns and cities where property price increases were particularly strong and nine where they were about average in the period 2009 to 2013. The findings present a picture of the impact of the dynamic price trend on lending activity.
And here, too, we cannot see any signs of trouble brewing. On the contrary, the banks report that they did not ease their credit standards. Conditions were more favourable for some customers due to the further decline in interest rates; the risk premiums that the banks priced in remained stable, however. Ultimately, credit standards for loans to households for house purchase remained unchanged in Germany, while they were eased slightly in the rest of Europe.
Yet this does not mean we can unreservedly sound the all-clear. This is because the special survey also reveals a fairly large share of loans with what we might refer to as high German sustainable LTV ratios (Hochausl?ufer) in the "attractive towns and cities" segment. With such mortgages, the loan is greater than the mortgage lending value, that is the value the bank calculates in respect of the property serving as collateral. Loans of this kind do not necessarily give cause for concern in each and every case: the borrower's high level of available assets or income can have a risk-mitigating effect. Nevertheless, the fact that such loans account for a large share of all mortgages does indicate that there might be structural vulnerabilities in the German banking system to crises on the real estate market.
The German Pfandbrief Act (Pfandbriefgesetz) restricts the German sustainable loan-to-value ratio (Beleihungsauslauf) to 60% of the mortgage lending value for loans that are eligible as cover for mortgagePfandbriefe. However, it is of limited effect as only one-tenth of residential mortgage loans are used to collateralise German mortgage Pfandbriefe. Building and loan associations implicitly limit the German sustainable LTV to 80%. Nevertheless, there is a lot of scope for mortgages with high German sustainableLTV ratios. Banking supervisors will be taking a closer look at this in future.
5 A look ahead – potential dangers
Ladies and gentlemen, we have taken a look at three criteria for property price bubbles: price trends, lending and credit standards. And none of these point to destabilising developments.
But the ECB's decision to purchase government bonds on a grand scale has marked the beginning of a new era on the capital markets and we must bear this in mind. Liquidity is rising and interest rates are falling. Yet this means that there is also an increased risk of asset price bubbles – not least on the real estate market. The world has thus become a rather more dangerous place for property investors.
The situation on the real estate market also hinges on the currently relatively favourable macroeconomic environment. If macroeconomic conditions were to deteriorate and the default rates for residential mortgage loans were to rise, German banks would stand to make considerable losses. This is the conclusion that banking supervisors drew from the special survey that I mentioned earlier.
We simulated various scenarios and found that, given an isolated shock on the real estate market, banks would still be able to meet regulatory capital requirements. If the banking environment were otherwise favourable, banks could compensate for an isolated shock of this nature with profits in other lines of business.
However, an isolated shock on the real estate market is rather unlikely. Empirical studies for the United States and other OECD countries instead indicate that real estate markets and macroeconomic developments are closely interlinked.
And in the event of a recession that extends beyond the real estate sector or even of a general financial crisis, cumulated losses could considerably impair banks' internal capital adequacy. My colleague on the Executive Board, Claudia Buch, mentioned this back in November 2014 when we presented the Bundesbank's latest Financial Stability Review.
Looking further ahead, there is yet another danger looming that we must keep in mind: the possibility of an interest rate reversal. To address interest rate risk, borrowers are increasingly opting for long-term loans with fixed interest rates, while banks are able to adequately hedge against risks arising from these longer interest rate lock-ins.
Nevertheless, both investors and banks must use the current low-interest-rate environment responsibly. And of course we should not forget that hedging against interest rate risk comes at a cost to banks. As a rule, loan contracts should only be signed if borrowers can continue to repay them even at higher rates of interest.
And, in light of current events, there is another danger that we should not overlook – that of foreign exchange risk. The discontinuation of the minimum exchange rate for the Swiss franc and the subsequent appreciation thereof may create difficulties for borrowers who have taken out property loans in Swiss francs. If default rates were to rise, banks could run into difficulties.
However, unlike in Austria or Poland for example, loans in Swiss francs play only a minimal role in Germany. According to current figures, property loans in Swiss francs account for only around ?2 billion of the entire volume of property loans of over ?1,000 billion in Germany. We thus see no need to be overly concerned.
6 What can we do?
Even though the risks emanating from the real estate market currently appear to be low, we must still be prepared for all eventualities. Financial supervisors need to be prepared in case a bubble should emerge on the real estate market.
It is thus crucial that we have tools at our disposal to contain the corresponding risks. This means that, in the end, it will be up to the central banks to step in and spoil the fun just as the party is in full swing.
Over the past few years we have begun putting together such a toolbox. We are currently closely examining a number of new tools to ascertain the precise effect that they would have. However, before we can use such tools, we need a fitting legal basis. The central body for systemic financial supervision in Germany, the Financial Stability Committee, is working on this at the moment. In the next few months, it plans to present the Federal Government with recommendations on establishing a legal basis for the use of these instruments.
However, elected politicians are also currently planning measures which I believe are headed in the wrong direction from an economic perspective. The cap on rents that is to be introduced in the near future aims to protect tenants in "overstretched housing markets" against sharp rent increases. Wealth distribution considerations are clearly the prime motivation for this move.
From an economic perspective, however, the measure is problematic as rising property prices are a sign of scarcity. They create an incentive to build new properties and thus increase the supply of housing. Regulatory intervention weakens this mechanism and thus ultimately prevents our society from having access to sufficient and affordable housing.
From an economic perspective, I therefore do not believe that the cap on rents is a suitable means of combating potential excesses on the real estate markets. The same is true of political initiatives to limit the conversion of rented apartments into owner-occupied apartments. This would constitute a major intervention into property rights and would make it more difficult for existing tenants, who have the right of first refusal, to own property.
7 Conclusion
Ladies and gentlemen, let us conclude. We started with the question: Is there currently a price bubble on Germany's real estate market? For Germany as a whole, the answer is no. We do not believe the current price increases to be problematic, lending is not rising excessively and credit standards have not been eased. Based on these three criteria, we do not consider there to be a property price bubble.
But, ladies and gentlemen, experience from other countries has shown that high liquidity and low interest rates create an environment which is often conducive to the formation of asset price bubbles. Thus the likelihood grows over time, and the ECB's purchase of government bonds will only fuel this growth further. There is no storm raging now but the winds are picking up, and last week the work of banking supervisors became yet more challenging.
But as Adam Posen, President of the Peterson Institute, said last week in an interview: "Germany must not take the rest of Europe hostage just to fight a bubble on its own housing market
". Instead he advised banking regulators and supervisors to address the problem directly. And that is precisely what we shall do.
However, each and every investor is ultimately responsible for being risk-aware in their actions. And, according to a survey by Ernst & Young, the vast majority of property investors expect risk appetite to grow.
I would caution against increasingly turning to risky investments to obtain that bit more profit while interest rates are low. At some point, interest rates will rise again, and then the financial burdens stemming from property loans will not be the only thing to increase. Both borrowers and lenders have a duty not to ignore this risk. In the current environment, banks should exercise particular caution when granting property loans.
The Bundesbank will fulfil its responsibilities. We will continue to closely monitor the real estate market, mortgage lending and the banks granting these loans and take action as soon as necessary.
Thank you very much.
美南加州多位华裔官员达成共识：民宅税率不能变--华人华侨
2015年06月01日09:38 来源：中国新闻网 美国《世界日报》
中新网6月1日电 据美国《世界日报》报道，2016大选年，加州有两个重要税源可能面临公投改革，一是第13号提案规定的加州产业税房屋估值每年不能增加超过2%，有人要求废除或部分改革；二是第30号提案“临时增税”到2018年届满，有人要求延长。南加多位华裔民选官员表示，民宅产业税率不能变，以保护屋主权益，但对商用楼产业税改革有两种意见；对30号提案倾向“有需要就延长”。
前核桃市长林恩成说， 1978年加州选民通过13号提案，房地产增值但产业税率每年增幅不能超过2%，确保加州居民尤其退休人士，不必担忧产业税骤升，也不必因为付不起产业税而丧失家园。他是该项提案的支持者，作为房产屋主，他是提案的维护者。近年来有人企图废除13号提案，按现行市值课税，必将对屋主造成很大伤害，他坚决反对。
2014年8月洛杉矶市议会以14对1票通过一项决议，要求改革13号提案商用楼税率，以当下楼价课税，为学校和公共服务增加税收。对此，阿罕布拉市议员沈时康表示，如果按商业楼时价调整产业税率，首当其冲的便是商场租户。现时商用楼或办公楼的产业税，大多由业主和租户对半分摊，甚至全部由租户承担，要看双方合同怎么签。如果按时价开征商用楼产业税，提高租户成本，商家也只能调高商品价格，最后转嫁给消费者。
圣玛利诺市议员孙渝认为，房产分为民宅和商用楼两大类别，控制民宅产业税率只能微幅上调是必要的，13号提案实施36年来保障了广大平民屋主的利益。但是，商用楼宇税率改革却有必要。因为几十年来，商用楼屋主或租户营业额可能成长几倍或几十倍，但商用楼课税仍以每年上限2%微幅增加，没有反映出商家经营收益，造成纳税结构不合理的现象。
罗斯密市议员劳朱嘉仪说，站在政府立场上，每年的市政管理和基础建设需要花费很多钱，而市府财源的很大一块来自产业税。她反对过度向纳税人课税，尤其是民宅部分需要保护屋主的权益，因为他们大多数人是收入不高的市民。但在商用楼课税方面，应当与时俱进实行改革。市府增加税收，才有能力改造城市、造福市民。
2012年通过的30号提案，要求对年收入超过25万美元的个人或年收入超过50万美元的夫妇，将原来的收入税率再提高1至3%，以及将加州销售税提高0.25%。不过有效期七年，到2018年退场。
对此，圣玛利诺学区教委张志坚认为，自从30号临时增税提案生效后，加州教育经费的窘状得到改善，尽管如此，仍比全国平均水平少。到2018年30号提案期满，如果届时加州财务状况未有明显改善，教育经费又将严重短缺。
他认为，政府和民众必须未雨绸缪，教育向来是加州预算案的优先开支项，30号提案已经成为教育经费的重要财源之一，未来如有需要，延长30号提案有效期也是选项之一。(丁曙）
