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Markets and Housing Finance

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  • Veronica Cacdac Warnock

    (University of Virginia, Hong Kong Institute for Monetary Research)

  • Francis E. Warnock

    (University of Virginia, Institute for International Integration Studies, National Bureau of Economic Research, Hong Kong Institute for Monetary Research)

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    Abstract

    We examine the extent to which markets enable the provision of housing finance across a wide range of countries. Housing is a major purchase requiring long-term financing, and the factors that are associated with well functioning housing finance systems are those that enable the provision of long-term finance. Across all countries, controlling for country size, we find that countries with stronger legal rights for borrowers and lenders (through collateral and bankruptcy laws), deeper credit information systems, and a more stable macroeconomic environment have deeper housing finance systems. These same factors also help explain the variation in housing finance across emerging market economies. Across developed countries, which tend to have low macroeconomic volatility and relatively extensive credit information systems, variation in the strength of legal rights helps explain the extent of housing finance. We also examine another potential factor ¨C the existence of sizeable government securities markets ¨C that might enable the development of emerging markets' housing finance systems, but we find no evidence supporting that.

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    Bibliographic Info

    Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 032008.

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    Length: 28 pages
    Date of creation: Mar 2008
    Date of revision:
    Handle: RePEc:hkm:wpaper:032008

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    Keywords: mortgage; housing finance; emerging markets;

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    References

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    1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    2. Lin, Che-Chun & Yang, Tyler T., 2005. "Curtailment as a mortgage performance indicator," Journal of Housing Economics, Elsevier, vol. 14(3), pages 294-314, September.
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    6. Stijn Claessens & Daniela Klingebiel & Sergio L. Schmukler, 2007. "Government Bonds in Domestic and Foreign Currency: the Role of Institutional and Macroeconomic Factors," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 370-413, 05.
    7. Honohan, Patrick, 2006. "Household Financial Assets in the Process of Development," Working Paper Series RP2006/91, World Institute for Development Economic Research (UNU-WIDER).
    8. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    9. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
    10. Sanders, Anthony B., 2005. "Barriers to homeownership and housing quality: The impact of the international mortgage market," Journal of Housing Economics, Elsevier, vol. 14(3), pages 147-152, September.
    11. Glaeser, Edward L. & Sacerdote, Bruce, 2000. "The Social Consequences of Housing," Journal of Housing Economics, Elsevier, vol. 9(1-2), pages 1-23, March.
    12. John D. Burger & Francis E. Warnock, 2006. "Local Currency Bond Markets," NBER Working Papers 12552, National Bureau of Economic Research, Inc.
    13. Franklin Allen, 2004. "Financial Systems in Europe, the USA, and ASIA," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 490-508, Winter.
    14. Piyush Tiwari & Yoko Moriizumi, 2003. "Efficiency in housing finance: a comparative study of mortgage instruments in Japan," European Journal of Housing Policy, Taylor and Francis Journals, vol. 3(3), pages 267-288, December.
    15. Dirk Brounen & Peter Neuteboom & Arjen van Dijkhuizen, 2006. "House Prices and Affordability - A First and Second Look Across Countries," DNB Working Papers 083, Netherlands Central Bank, Research Department.
    16. Eric Chan & Michael Davies & Jacob Gyntelberg, 2006. "The role of government-supported housing finance agencies in Asia," BIS Quarterly Review, Bank for International Settlements, December.
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    19. Quigley, John M., 2002. "A Decent Home: Housing Policy in Perspective," Berkeley Program on Housing and Urban Policy, Working Paper Series qt8f57x42q, Berkeley Program on Housing and Urban Policy.
    20. Piyush Tiwari & Yoko Moriizumi, 2003. "Efficiency in housing finance: a comparative study of mortgage instruments in Japan," International Journal of Housing Policy, Taylor & Francis Journals, vol. 3(3), pages 267-288.
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    Cited by:
    1. Nguyen, Quoc Hung, 2013. "Housing investment: What makes it so volatile? Theory and evidence from OECD countries," Journal of Housing Economics, Elsevier, vol. 22(3), pages 163-178.
    2. Suntum, Ulrich van, 2009. "Housing, taxation and retirement provision," Journal of Housing Economics, Elsevier, vol. 18(3), pages 249-255, September.
    3. Agustín S. Bénétrix & Barry Eichengreen & Kevin H. O'Rourke, 2012. "How housing slumps end," Economic Policy, CEPR & CES & MSH, vol. 27(72), pages 647-692, October.
    4. Joshua Aizenman & Yothin Jinjarak, 2008. "Current Account Patterns and National Real Estate Markets," NBER Working Papers 13921, National Bureau of Economic Research, Inc.
    5. Miguel Palomino Bonilla & Rudy Wong Barrantes, 2011. "Housing Finance in Peru: What is Holding it Back?," Research Department Publications 4748, Inter-American Development Bank, Research Department.
    6. Kenneth Kuttner & Ilhyock Shim, 2012. "Taming the Real Estate Beast: The Effects of Monetary and Macroprudential Policies on Housing Prices and Credit," RBA Annual Conference Volume, in: Alexandra Heath & Frank Packer & Callan Windsor (ed.), Property Markets and Financial Stability Reserve Bank of Australia.
    7. Beatriz Larraz, 2011. "An Expert System for Online Residential Properties Valuation," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 69-82, April.
    8. Alessio Ciarlone, 2012. "House price cycles in emerging economies," Temi di discussione (Economic working papers) 863, Bank of Italy, Economic Research and International Relations Area.
    9. Mario Cuevas & Sigfrido Lee & Maria Isabel Bonilla, 2011. "The Missing Foundations of Housing Finance: Incomplete Markets, Fragmented Policies and Emerging Solutions in Guatemala," Research Department Publications 4750, Inter-American Development Bank, Research Department.
    10. Francis E Warnock & Veronica Cacdac Warnock, 2012. "Developing Housing Finance Systems," RBA Annual Conference Volume, in: Alexandra Heath & Frank Packer & Callan Windsor (ed.), Property Markets and Financial Stability Reserve Bank of Australia.
    11. Badev, Anton & Beck, Thorsten & Vado, Ligia & Walley, Simon, 2014. "Housing finance across countries : new data and analysis," Policy Research Working Paper Series 6756, The World Bank.
    12. Ricardo Bebczuk & Maria Lorena Garegnani, 2012. "Real State as Housing and as Financial Investment: A First Assessment for Argentina," Department of Economics, Working Papers 095, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    13. Mohammad Reza Farzanegan & Hassan Gholipour Fereidouni, 2014. "Marriage Crisis and Housing Costs: Empirical Evidence from Provinces of Iran," MAGKS Papers on Economics 201401, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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