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?

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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

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 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%

1,061,906

100%

Private Flats 12.5%

Private Houses 6.2%

Singapore Housing Stock 2001


Privatization of state housing

Privatization of state housing

  • 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


Nominal and real housing price indices

Nominal and real housing price indices


Real gdp

Real GDP


Stock of housing loans to gnp

Stock of housing loans to GNP


Housing loans

Housing Loans


Housing wealth distribution

Table 1Housing Stock in 1999

Housing Wealth Distribution


Estimates of housing wealth

Estimates of housing wealth


Net equity in housing relative to gdp

Net equity in housing relative to GDP


Problems with the cpf

Problems with the CPF

  • 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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