Post on 30-Dec-2015
description
Monitoring Indicators from a Macroeconomic Viewpoint
Doris Ritzberger-Grünwald Director, Economic Analysis and Research Department
October 16, 2014
WPLA Workshop: Real Estate Infrastructure – Fit for Use?
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Economic Situation, Property Prices and Financial Stability
• Real estate is the most important component of household wealth – housing wealth has a share of 50-70% in total wealth of private households
• Property prices affect households’ consumption and savings behavior and the economic activity of the construction sector.
• Real estate loans play a pivotal role in bank portfolios
• Real estate transactions are often (at least partly) mortgage-financed -> house price developments have effects on the debt situation and vulnerability of private households
• Housing costs take a high share in total households‘s expenditure
• We saw quite high increases in housing prices, especially in Vienna
• Question whether it is a bubble or not is not easy to answer due to bad data situation
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A Holistic Approach to Real Estate Monitoring
Monitoring the possible threats to financial stability arising from the real estate sector requires a holistic approach, utilizing indicators from different sectors:
1. Macroeconomic environment
• Real and nominal macroeconomic developments
2. Residential property market
• Residential property prices, rents, transaction volumes
3. Fundamental factors
• Supply-side factors: Housing investment, building permits, building costs, …
• Demand-side factors: Population, migration, household income, interest rates, …
• Overall assessment of house prices: Deviation from fundamentally justified prices
4. Financing and indebtedness of the household sector
• Indebtedness, loan volumes, new loans, share of subsidized loans, lending rates, …
5. Banking perspective
• Various loan-related indicators (LTV, DTI, DSTI ratios), refinancing structure, …
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1) Macroeconomic Environment
• OeNB forecast (June 2014):
2014: +1.6%
2015: +1.9%
• Since then:
• Slightly weaker outcome in Q1 and Q2;
• Negative impact of conflict Russia/Ukraine on confidence
• Update of OeNB conjunctural assessment in October 2014:
• Slower growth in 2nd half year
• Growth outlook 2014 revised down substantially (+1.6% down to +0.8%)
• Downward revision of GDP growth prospects also for 2015 (+1¼%)
-1.0
3.0
-0.5
0.0
0.5
1.0
1.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014
Change to previous quarter Forecast Change to previous year
Source: OeNB's Economic Indicator from July 2014, Eurostat..
+2.9
+0.1* +0.2*
+0.7+0.4
Change to previous quarter / year in %
Short-Term Outlook for Austria's Real GDP for the third and fourth Quarter of 2014 (seasonally and working-day adjusted)
*) Forecast
+0.8*
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2.) Residential Property Market:Austrian House Price Cycle Differs from Euro Area Average
Source: ECB, OeNB, Vienna University of Technology. Source: StatistikAustria, Eurostat.
80
100
120
140
160
180
200
220
2000 2002 2004 2006 2008 2010 2012 2014
Vienna Austria Euro area
Residential PropertyPrices in Austria and the Euro Area
2000=100
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014
Euro area Austria
Inflation in Austria and the Euro Area
Annual changeof HICP in %
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80
100
120
140
160
180
200
220
1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12 1Q14
Purchases of single family housesBuilding lots for private homesNew apartmentsImmobilienpreisindex
2000=100
Housing market developments in Vienna
80
100
120
140
160
180
200
220
1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12 1Q14
Standardized apartment rentsNon-standardized apartment rentsRents of single family houses
2000=100
Source: OeNB, Austria Real Estate Exchange, Vienna University of Technology, Institute for Urban and Regional Research.
2.) Residential Property Market: Detailed Price Data as Prerequisite for Analysis
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60
70
80
90
100
110
120
130
140
150
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
1Q13
1Q14
Property price indexPurchases of single family housesBuilding lots for private homesPurchases of new apartmentsPurchases of apartmentsPurchases of used apartments
2010=100
Housing Market Developments in Austria excl. Vienna
Source: OeNB, Austria Real Estate Exchange, Vienna University of Technology, Institute for Urban and Regional Research.
60
70
80
90
100
110
120
130
140
150
1Q01
4Q01
3Q02
2Q03
1Q04
4Q04
3Q05
2Q06
1Q07
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
Apartment rents
Rents of single family houses
2010=100
2.) Residential Property Market: Detailed Price Data as Prerequisite for Analysis
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• Indicator assesses whether price increases are justified by fundamental factors or whether they are exaggerated
• Indicator consists of seven subindicators addressing three perpectives (household persp., investor persp., systemic persp.)
• Vienna: Overvaluation of residential property prices by 23%
• Austria: Prices are justified by fundamental factors
• Caveats:
• High degree of uncertainty
• Results do not imply any recommendation to buy or sell specific properties
3.) Fundamental Factors: OeNB Fundamental Residential Property Price Indicator Points to Overvaluation in Vienna
-20
-10
0
10
20
30
90 92 94 96 98 00 02 04 06 08 10 12 14
Vienna Austria
Deviation of residential property prices from fundamentals in %
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-2
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014
Austria Euro Area Germany
Mortgage Loansannual change in %
Financing
Source: OeNB, Eurostat.
50
52
54
56
58
60
62
64
66
68
70
2007 2008 2009 2010 2011 2012 2013 2014
Austria Euro area
Debt of private households
in % of GDP, 4 quarter moving average
4.) Financing and Indebtedness of the Household Sector: Low Level of Debt and Moderate Loan Growth
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Some Reasons for the Low Risk Arising from the Austrian Real Estate Sector
Structure of the housing market
• A low homeownership rate (58% compared to 71% in EU-27) and well-developed rental market help to stabilize prices
Financing structure
• A large share of Austrian households (80%) finance their real estate (at least partly) by own equity
• Favorable household debt structure (debt is concentrated on wealthy households)
• Lending practices of banks are conservative
Tax system
• Tax system does not provide incentives for indebtedness (no deductibility of mortgage interest expenses)
• High transaction costs disencourage speculation
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5.) Banking Perspective
Monitoring is hampered by the lack of data for macroprudential analysis
• Various loan-related indicators (LTV, DTI, DTSI ratios) should ideally be available at a very granular level
• This allows to detect problems before they arise
• Macroprudential policy in most European countries can already build on these data
• It is a key priority to collect data for Austria in a systematic way
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Summary for Austria
Price developments• Strong price increases since 2007 • Heterogeneous development in different regions and segments
Factors behind price developments:• Increased demand: Immigration, flight to real assets (crisis), low or negative returns
with alternative investments, low credit interest rates• Construction activities could not meet demand• Catching up compared to other countries/comparable locations in Europe• Some charges were increased in recent years• OeNB's Real Estate Indicator identifies deviation of prices from fundamental prices of
+23% in Vienna and of 0% in Austria
Assessment: Threat for financial stability is assessed to be low • Growth of mortgage loans is moderate• Indebtedness of households is low in international comparison• There is no inflated construction sector
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International Developments:Do House Price Developments in Some Euro Area Countries Pose a Threat for Financial Stability?
0
20
40
60
80
100
120
140
160
2000 2003 2006 2009 2012
Ireland Spain
Greece Cyprus
Estonia Slovakia
2007=100Countries with strong corrections
Source: ECB
0
20
40
60
80
100
120
140
160
2000 2003 2006 2009 2012
Portugal Italy
Netherlands Malta
Slovenia France
2007=100Countries with modest corrections
0
20
40
60
80
100
120
140
160
2000 2003 2006 2009 2012
Belgium Germany
Luxembourg Austria
Finland
2007=100Countries without corrections
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International Developments: A Number of EU Countries Have Already Taken or are Planning Measures Concerning Real Estate Risks
(as of 20 Sep 2014):• Higher risk weights for mortgage lending: BE, IE
• Stricter criteria for real estate exposures: HR, IE*, UK* (* for commercial property lending)
• Lower Loan-to-Value/Loan-to-Income ratios: NL, HU, NO (LTV), UK (LTI)
• Outside the EU: Switzerland increased the sectoral countercyclical capital buffer for positions secured by residential property