What should be the government s role in the primary mortgage market
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What should be the government’s role in the primary mortgage market?. Sock-Yong Phang Singapore Management University Housing Finance Panel 5 July 2002 AsRES/AREUEA Conference Seoul. What should be the government’s role in the primary mortgage market?.

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What should be the government s role in the primary mortgage market

What should be the government’s role in the primary mortgage market?

Sock-Yong Phang

Singapore Management University

Housing Finance Panel

5 July 2002

AsRES/AREUEA Conference

Seoul


What should be the government s role in the primary mortgage market1
What should be the government’s role in the primary mortgage market?

Governments should be involved because of

  • positive (social, political, neighbourhood) externalities of home ownership

  • Risks due to moral hazard and incomplete and underdeveloped insurance markets


Lenders risks measures

Credit or default risk mortgage market?

Price or I.R. risk

Prepayment risk

Operational risk

Mortgage insurance

Cap on loan to value

Mandatory housing fund

Development of VRMs

Securitization

Title insurance

Escrow

Clear legal framework

Supervisory bodies

Lenders’ Risks Measures


Determinants of dd measures to for mortgage loans strengthen demand

Housing P affordability mortgage market?

Mortgage P affordability

Liquidity of asset

Labour income risk

Housing wealth risk

Housing price expectations

Supply of affordable housing

Supply of affordable mortgage loans

Reducing transaction costs

Employment creation and economic growth

Reducing P volatility

LR housing P appreciation

Determinants of Dd Measures to for mortgage loans strengthen demand


Singapore housing stock 2001

Public Housing 81.3% mortgage market?

1,061,906

100%

Private Flats 12.5%

Private Houses 6.2%

Singapore Housing Stock 2001


Privatization of state housing
Privatization of state housing mortgage market?

  • Built by the public sector (HDB)

  • Rent or owned by households

Percentage of public sector built housing that is owner-occupied:

1970 21% of 120,138 units

  • 64% of 337,198 units

  • 87% of 574,443 units

    2001 93% of 849,422 units



Real gdp
Real GDP mortgage market?



Housing loans
Housing Loans mortgage market?


Housing wealth distribution

Table 1 Housing Stock in 1999 mortgage market?

Housing Wealth Distribution


Estimates of housing wealth
Estimates of housing wealth mortgage market?



Problems with the cpf
Problems with the CPF mortgage market?

  • Constraints distort household behaviour leading to overinvestment in housing

  • CPF liberalization in 1981 and 1993 contributed to housing price bubbles

  • Households are housing asset rich and cash poor at retirement

  • Hindered entrepreneurship

  • Low real return on CPF balances is an implicit tax

    Recent policy changes to allow diversification of CPF balances into stocks, bonds, unit trust, and insurance products


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