Housing Bubble Research Articles

Zombie lending, labor hoarding, and local industry growth

After the bursting of real estate bubbles in 1991, Japanese banks continued lending to unviable firms to conceal problem loans. We revisit Japan’s experience and propose a new mechanism via which banks’ loan-evergreening policy undermines allocative efficiency across industries by focusing on construction and real estate loans. Namely, banks’ continuing support for construction and real estate firms encourages labor hoarding in unviable construction projects. Since construction projects predominantly use low-skilled workers, banks’ loan-evergreening policy in these troubled sectors may depress other low-skilled industries. Based on the industry-level data in each of Japan’s 47 prefectures from 1992 to 1996, we document empirical facts consistent with this hypothesis. On average, low-skilled industries experienced disproportionately slower output and employment growth and more sluggish growth in the number of new establishments in prefectures where the share of bank loans to local construction/real estate sectors increased more after construction boom ended.

Synchronization analysis between exchange rates on the basis of purchasing power parity using the Hilbert transform

Synchronization is a phenomenon in which a pair of fluctuations adjusts their rhythms when interacting with each other. We measure the degree of synchronization between the U.S. dollar (USD) and euro exchange rates and between the USD and Japanese yen exchange rates based on purchasing power parity (PPP) over time. We employ a method of synchronization analysis using the Hilbert transform and find that the degree of synchronization is high most of the time, which suggests the establishment of PPP. The degree of synchronization does not remain high across periods with asymmetric economic events such as the U.S. real estate bubble.

Barricades against Evictions: Coexistence of Short- and Long-term Frames in the Housing Movement on Facebook and Twitter

Social movements fight to change society’s roots and challenge entrenched cultural frameworks. At the same time, however, they must attend to everyday activism and protests that constitute a clear and pragmatic mobilization goal. This article analyzes the case of a movement for decent housing on social media called Platform for Those Affected by Mortgages (PAH). This organization fights to guarantee universal access to housing, a recurrent problem in large cities. It grew in 2010 when the subprime mortgage crisis broke out in the United States. The bursting of the real estate bubble built up at that time had a global impact, pushing other markets. On the one hand, the movement has to change entrenched cognitive frameworks that say property must be bought and its loss is the individual’s responsibility. On the other hand, it must coordinate and try to gather as many people as possible to stop the evictions that occur every day. Twitter seems crucial for daily mobilization in this double logic, while Facebook allows for more complex narratives. The methodology used was a framing analysis of the content published on the organization’s official Facebook and Twitter accounts. Although these should be understood as overlapping layers, the movement is often trapped in a narrative that it does not want. By highlighting specific cases, it leads to an understanding that access to housing does not affect most of society.

Evolution of the Household Debt Narrative: A PRISMA-compliant Systematic Literature Review

This article focuses on the narratives that are developing in the household debt arena through a systematic and in-depth examination of the literature. The article used co-occurrence analysis to identify the major themes in the household debate followed by a review of the top 100 highly cited articles, which is supplemented with citation tracking. It is found that the past research mainly concentrates on the effect of financialization and deregulation of global markets, mortgages and housing bubbles, the upward trending inequality, the GDP growth and financial stability as well as the relationship between the household balance sheet and macroeconomic fluctuations. This study highlights the significant and upcoming trends in the study of household finances placing it at the centre of academic discourse on economic crisis and financial stability. It tracks the channels through which household debt could have potential impact on economic stability by summarizing the significant studies and deriving conclusions and direction for future research.

Bank failures, capital buffers, and exposure to the housing market bubble

AbstractWe develop housing overvaluation measures that are separate from local economic conditions and show that banks with greater exposure to such overvalued markets have higher mortgage delinquency and charge‐off rates and significantly higher probabilities of failure during the 2007–2009 financial crisis even after controlling for bank characteristics. While high house prices relative to fundamentals present a greater likelihood of house price correction, we find no evidence that banks managed this risk by building capital. We also show that our overvaluation measures are important in explaining individual mortgage loan defaults and could be used to improve bank risk management.

Macroeconomic Influences on Baltic Housing Loan Flows

This study investigates the impact of macroeconomic factors on housing loan flows in the Baltic region post-2008 housing bubble. Using stepwise regression, Lasso regression, and pooled regression, data is analyzed from Estonia, Latvia, and Lithuania spanning 2014 to 2023. Results reveal the significant influence of borrowing costs, wages, unemployment, and inflation rates on loan flows.

For the greater good: modern China’s struggle on housing shortage

The examination of housing shortages in China presents a fascinating subject that is rarely directly addressed. This topic not only captures our interest due to the irony in a communist country but also in light of the profound transformation of Chinese society, evolving from an agrarian civilization to a modern industrialized state. The objective of this essay is to establish a comprehensive framework that encompasses economic, social, and architectural narratives as an integrated whole. This essay delves into the historical trajectory of housing shortages in modern China, tracing the evolution of this issue within Chinese society since the founding of the communist regime in 1949. Given China’s unique industrial and residential policy framework, housing provision is intrinsically linked to state-owned factories and residential certification, commonly referred to as hukou. As the political and economic foundations have shifted over time, so too has the root cause of housing shortages. In addition to general historical and theoretical research, we have undertaken an in-depth examination of Lanxi City, one of the industrial clusters established in China. The case study of Lanxi City involves a series of visits and interviews conducted within local factories and communities. Our analysis identifies two distinct phases in this evolution: the “fundamentalist communist era” and the transitional period toward a market economy. Each of these eras can be further subdivided into four distinct phases, providing a more nuanced perspective. Our findings reveal that various housing distribution mechanisms have contributed to the issue of housing shortages. During the first era, housing shortages were primarily a result of hukou restrictions, industrial disparities, sluggish construction processes, and corporate profit considerations. In the latter phase, spanning the 1980s and 1990s, housing shortages were exacerbated by escalating costs and a slow rate of housing unit replenishment. As the new millennium unfolded, real estate bubbles compounded the housing crisis, with older neighborhoods ill-suited for modern living. Our interviews and visits complemented our literature research, offering valuable insights into the systemic exploitation of specific groups in pursuit of broader goals, hence the title. This paper underscores the housing shortage in China as a consequence of economic disparities between urban and rural regions, as well as between the prosperous East coast and the underdeveloped West hinterland.

The “China Model”— Merits and Demerits, A Review of the Last 20 Years of the Chinese Economy

The “China Model,” which combines Chinese Communist Party (CCP) dictatorship with the use of a market economy, has been a long-term growth driver of the Chinese economy, but its content has undergone a transformation in terms of both governance and economic policy. In the early 2000s, competition among local leaders who were given sizeable discretionary authority led to dramatic regional growth but also produced various side effects. In the 2010s, however, a transformation to investment competition through debt occurred in local governments, resulting later in a real estate bubble and local fiscal crisis. The adverse effects of the Xi Jinping regime’s concentration of power have created balance sheet deterioration caused by years of excessive debt and overinvestment. The Chinese economy is now being forced to liquidate its deteriorated balance sheets, which have been weakened by years of excessive debt and overinvestment. The ineffective investments and the interest payments resulting from “implicit guarantee” by the governments have become a heavy burden on the economy, further distorting the distribution of wealth and leading to a slump in consumption. To break the current deadlock, major reform is needed, including the write-off of non-performing assets, which would bring about deflationary pressure, and the reduction of the role of state-owned enterprises, a change so significant that it would reshape the “form of the nation.” However, this would inevitably clash with President Xi Jinping’s pledge for “the great rejuvenation of the Chinese nation,” a promise made to secure his extended tenure. Given that an extraordinary concentration of power is centered on President Xi and the Chinese autocratic system lacks a mechanism for regime change, achieving such reforms will be very difficult.

주택매매시장에서의 거품에 관한 실증연구

This study examines the monthly real house price index movements over the period 1986-2023 using the GSADF method to determine whether bubbles existed in the Korean housing market, where they occurred, when they occurred, and how long they lasted by housing type (total, apartment, detached house, and townhouse). We summarise the main findings from our empirical analysis as follows. First, there were multiple bubbles in housing prices across the nationwide, Seoul, and all provincial metropolitan areas. However, there are many differences in how bubbles occurred across regions and types of housing. Second, the post-bubble period lasted much longer in the detached house market than in the apartment and row house markets. Third, many housing market bubbles occurred during periods of abundant liquidity. Fourth, while most bubbles are positive, appearing during periods of rapid house price appreciation, negative bubbles appeared in some areas (Busan, Gwangju, and Ulsan) during the 1998 Asian financial crisis. Fifth, the detached house markets in Busan and Ulsan are found to be bubbling at the end of the sample (December 2023). These results suggest that the GSADF test can not only detect historical bubble periods, but can also detect bubbles in real time, providing early warning of bubbles.

Causes of Housing Bubble in Japan

To find ways to facilitate the development of the real estate economy, this paper examines the Japanese housing bubble of the 1980s, one of the most representative in history. Japan's housing bubble provides us with a good economic model, for which we need to discuss the impact of monetary policy on the housing bubble. Through monetary policy, combined with Taylor's rule, it is analyzed that most of the monetary policy in Japan during that period was in a loose state. Loose monetary policy brought about a series of crises that are detrimental to economic development, such as the rise in land and stock prices, coupled with a series of social problems such as the aging of the population, which ultimately led to the occurrence of the real estate bubble. Japans bubble economy provided a good reference for future generations: the government needs to control the degree of easing and strengthen supervision and risk management.

The loose monetary policy and the housing bubble

This research paper explores whether loose monetary policy has led to a real estate bubble. The background section of the study introduces the current impact of monetary policy on the real estate market and the importance of the formation and bursting of real estate bubbles. The significance of this research lies in understanding the mechanism by which monetary policy affects the formation of real estate bubbles and providing references for relevant policy formulation.

The 3 Decades Global Financial Policy Failure in Housing Market, Runaway Home Prices, Today’s Growing Homeless Crisis: Eddison Walters Real Estate Housing Technology Structural Change Transformational Theory

Failure to address technological-driven structural changes in the real estate market that began three decades ago has caused runaway home prices that developed countries are experiencing today. The real estate crash that preceded the Global Financial Crisis, and the entire Global Financial Crisis resulted from the panic that was created about the rapid increase in home prices that was falsely labeled a real estate bubble by the media which was quickly adapted by policymakers. Policymakers and the media blamed greedy mortgage brokers for the rapid increase in home prices, accusing mortgage brokers of providing mortgages to too many people for homes that the borrowers could not afford. It turns out that the media and policymakers were completely wrong when mortgage brokers were falsely blamed for creating a real estate bubble because a real estate bubble never existed. The true cause of the rapid increase in home prices was the early stages of a real estate boom from technological-driven structural changes in the real estate market. Failure to address structural changes in the real estate housing market which started three decades ago, has resulted in runaway home prices in the United States and developed countries around the world. As a result of the failure widespread economic hardship from homelessness is a significant risk as working families find themselves priced out of the housing market. Three decades of economic policy failures and the mismanagement of the housing sector have resulted in a looming housing crisis that continues to increase as developed countries face runaway home prices. Policymakers throughout developed countries eagerly accepted the media-driven misinformation of a real estate bubble without any evidence presented supporting the narrative. The failure of policymakers to gain an understanding of factors that have been driving the rapid increase in home prices which began three decades ago, resulted in the real estate crash, Global Financial Crisis, and Great Recession. Much of the economic hardship and the looming housing crisis facing working families today could have been avoided. For many working American families, the prospect of home ownership no longer exists due to skyrocketing home prices. The looming homeless crisis facing the developed world today is the direct result of economic policy failures that have ignored the structural changes in the housing market for three decades. The move from print media real estate listings to online real estate listings and the adaptation of online mortgage loan applications along with automated mortgage underwriting between 1995 and 1999, exponentially increased the quantity of inventory needed in the housing market of developed countries. The shift in the demand curve for housing structurally changed the housing market in developed countries resulting in the complete transformation that saw the demand for housing skyrocket by 2000. New homebuyers who previously only had access to local housing markets before the transformation of the housing market began in 1995, had full access to homes listed anywhere online in other real estate markets by the end of 1999. The increased demand caused the rapid growth in home prices. Failure to implement policies to drastically increase home inventory in developed countries to address the structural transformation of the housing market which drastically increased the demand for homes was a significant economic policy failure. Instead of implementing policies to significantly increase home inventory, new construction was idle for over a decade as policymakers adopted the media-driven misinformation of a real estate bubble and supported policies to address the nonexistent real estate bubble.

Use of Digital Tools (Wikihouse System) in Multi-Local Social Housing

The primary objective of this study is to formulate a comprehensive digital and physical model, at a scaled level, for a social housing unit utilizing the open-source Wikihouse system. The construction industry is currently grappling with the dual challenges of a real estate crisis and climate change. In response to this scenario, the integration of industrialized methods in construction processes is advocated to enhance the overall quality of the end product, streamline construction timelines, and curtail production costs. The algorithm developed for this purpose leverages Rhino and Grasshopper programs, thereby optimizing material efficiency when compared to traditional individual pieces. Noteworthy among the features of the Wikihouse system is its remarkable versatility, allowing implementation in diverse locations. This flexibility stems from its efficient assembly characteristics, which liberate it from the constraints of rigid modular structures, contributing significantly to architectural design flexibility. The paramount finding of this research is the demonstrated efficiency of the proposed system, requiring 44% less time compared to conventional construction practices and exhibiting a commendable 29% reduction in costs. These outcomes position the Wikihouse-based approach as an appealing and competitive alternative within the real estate sector.

A supermultiplier demand-led growth accounting analysis applied to the Spanish economy (1998–2019)

In this paper, we analyse the demand-led determinants of Spanish economic growth from 1998–2019. We apply the supermultiplier demand-led growth accounting methodology by Freitas/Dweck (2013) with two modifications: First, we incorporate consumption out of public transfers, following Haluska et al. (2021) and Haluska (2023). Second, we incorporate consumption out of public wages as a source of autonomous demand, theoretically suggested by Serrano/Pimentel (2019). Our demand-led growth decomposition highlights: (i) public demand and exports as important stable growth drivers, and a decreasing supermultiplier that reduces growth rates; (ii) the indirect effect of a real estate boom in the economic expansion of 1998–2008 caused by increasing public revenues and opening space to the expansion of public demand; and (iii) the incapacity of exports to lead the recovery alone, as the latter started only with the resumption of the public and private demand.

The spillover effect of real estate boom on stock market efficiency: evidence from China

ABSTRACT We examine how the increase in real estate prices affects stock market efficiency. Using a sample of Chinese listed firms from 2010 to 2019, we find that high local real estate prices significantly exacerbate stock mispricing. Our findings remain robust after dealing with endogeneity concerns using an instrumental variable approach, an alternative sample choice, and alternative variable measurement. The positive effect of housing prices on stock mispricing is weaker for cross-listed firms and more pronounced for firms with more positive media coverage. Further analysis shows that the booming real estate market accelerates c orporate financial assets investment and inspires optimistic investor sentiment. Our results shed light on the negative spillover effect of the overheated real estate sector from the perspective of capital market efficiency.

Insight into facilities management market in the UAE: trends, drivers, and threats

PurposeThe UAE is among the fastest-growing facilities management (FM) markets globally. Nevertheless, conclusive evidence on this market is scarce in the literature. Therefore, this paper aims to provide an in-depth insight into the FM market in the UAE.Design/methodology/approachFourteen interviewees were purposively selected to provide insight into FM status through their field experiences. A SWOT analysis of their answers held place.FindingsInterviewees revealed that the main trends of FM in the UAE include interests in sustainability, integration of technology, health and safety, outsourcing FM, switching to total facilities management (TFM), and performance management systems use. Besides, the quality of the service in the FM market is driven by the real-estate boom, services sophistication, the increasing awareness of FM and focus on the quality of services. Furthermore, the interviews found that the recruitment of poorly skilled labors can threaten the FM market to meet the allocated budget, misperception of FM, the value of money, the lack of continuous follow-up with recent advancements in technologies and the lack of performance measurement models.Originality/valueThis paper highlights the major trends, drivers and threats of the FM market in the UAE, and the implications of its findings can direct FM organizations and researchers in their practices.

The Evergrande Story: A Look into Chinese Corporate Law and the Redefinition of Privately Owned Enterprises and Their Relationship to State-Owned Enterprises in the Chinese Economy

Abstract In December 2021, Evergrande, the second-largest private property developer in China, defaulted on its debt and became the most indebted firm in the world with over $300 billion in liabilities. Its default marked the beginning of a real estate crisis in China, one that is still in the process of being resolved. The Chinese State, through its State-owned enterprises (SOEs), has played an enormous role in mitigating the crisis. Had it not, it is very unlikely that Evergrande would remain in existence today, with huge ramifications for Chinese society and the national economy. This article undertakes a case study of Evergrande, a privately owned enterprise (POE) that exhibits SOE characteristics, to shed further light on the web of interactions between large enterprises in China. It reconsiders how ‘private’ some POEs are in the Chinese economy and argues that, at a certain level, both SOEs and POEs operate in a co-dependent manner. Not only does this challenge the conventional distinction between SOEs and POEs, but it also has wide-ranging implications for corporate governance in China. Indeed, SOEs find themselves having to bail out POEs and are exerting control over POEs in which they have no equity stake. SOEs are thus financially burdened with protecting all large enterprises including POEs, whereas POEs can operate in an unregulated fashion and receive rents from their close ties to SOEs. Altogether, this article’s analysis showcases the operation of various themes of Chinese corporate governance and contributes to the existing literature seeking to understand the unique role of the State in Chinese enterprises.

China in 2023

In 2023, in an effort to revive the sluggish economy after the COVID-19 pandemic, the Chinese government implemented a variety of stimulus measures, such as interest rate cuts, tax cuts for small and medium-sized enterprises, and the issuance of local government bonds. But recovery has been challenging owing to export controls by the United States, lackluster domestic demand, high youth unemployment, and a real estate bubble. Externally, to respond to stronger cooperation between the United States and its allies in Western Europe and Asia, China actively pursued diplomatic activities with its traditional allies, such as Russia, and developing countries.

Corporate Governance and Collateral Effect of Real Estate

The collateral channel literature predicts that soaring real estate prices increase the debt capacity of firms with more real estate asset holdings. This paper discusses the different relationships between collateral and investment. We find that firms with strong corporate governance were more likely to increase debt capacity via the collateral channel during the real estate boom from 1993 to 2006. Entrenched managers used less debt to finance their investments when their real estate collateral values increased. Our results hold even after controlling for non-collateralized debts and credit rating of the sample firms.

Energy transition and housing market bubbles: Evidence from prefecture cities in China

Governments are committing to realizing the energy transition to create a sustainable and resilient energy future, while less is known about the real effects of the energy transition on various sectors of the economy, particularly the tertiary industry. This paper thus investigates the relationship between the energy transition and housing market bubbles at the level of prefecture cities in China. We find that an increase in one standard deviation of the energy transition decreases approximately 39% of the average housing bubbles index. Furthermore, the digital economy and land transfer income of real estate enterprises could be underlying economic channels to significantly explain the impacts of the energy transition on housing market bubbles. Finally, we identify that green finance including green loans and green bonds enhances this negative effect on housing market bubbles. Our main result remains valid in a battery of robustness tests. This study provides important practical implications for policy makers, enterprises, and investors.