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Relationships between the finance system and housing markets

Author

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  • Piotr Lis

    (Department of Economic and Local Government Policy, Poznan University of Economics)

Abstract

This study identifies the channels of impulse transmission from housing markets to the economy. Particular attention is paid to house prices, housing investments, the wealth effect and the financial accelerator. Furthermore, the author proves that the interior changes on the housing market occur earlier than the changes in the transactional prices of dwellings. This phenomenon results among all from the downward rigidity of prices. That is why, housing cycles should be identified as quantitative cycles rather than price cycles. In this approach, the author highlights the extended ascending phases of housing markets as particularly hazardous for the economy. Such extended ascending phases lead to abrupt and deep descending phases which, in turn, cause an economic slowdown and serious problems of the financial sector. Furthermore, the author of the study proves that financial markets cause the ascending phases of a housing cycle to extend. For that reason, this work offers an analysis of the development of the financial system in Europe conducted in comparison with global conditions, indication of the key determinants of this development, identification of housing investment finance mechanisms together with the assessment of the impact of these mechanisms on housing cycles. The sources of refinancing housing loans (mortgages) have been considered to be the main criterion differentiating the influence of the financial system on the housing sphere.

Suggested Citation

  • Piotr Lis, 2015. "Relationships between the finance system and housing markets," Working papers wpaper99, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    • Handle: RePEc:fes:wpaper:wpaper99
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    Cited by:

    1. Eckhard Hein, 2015. "Causes and Consequences of the Financial Crisis and the Implications for a More Resilient Financial and Economic System: Synthesis of FESSUD Work Package 3," Working papers wpaper128, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    2. Hein, Eckhard, 2016. "Causes and consequences of the financial crisis and the implications for a more resilient financial and economic system," IPE Working Papers 61/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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    More about this item

    Keywords

    housing; housing finance; housing policy; housing cycles; housing boom;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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