font scris: georgiathe 4th sector in the economy (8.5% of gdp in 1h2017, below the ue average) in...
TRANSCRIPT
NATIONAL BANK OF POLAND
RECENT TRENDS IN THE REAL ESTATE MARKET
INTERNATIONAL CONFERENCE
THE HOUSING PRICES IN ROMANIA
- recent developments -
WARSAW
21 - 23 November 2017
Ph.D. Andrei RĂDULESCU
Senior Economist
Researcher, IWE, Romanian Academy
CONTENT
I. INTRODUCTION
II. MACROECONOMIC CLIMATE
III. REAL ESTATE MARKET IN ROMANIA
IV. METHODOLOGY
V. RESULTS
VI. CONCLUSIONS
INTRODUCTION
REAL ESTATE IN THE POST-CRISIS CYCLE
The era of “everything is bubble”, supported by the expansionary monetary policy
after the incidence of the Great Recession
A cyclical component of the economy, known as “the perfect imperfect market”
Incidence of pro-cyclical movements (boom-bust) – “the wealth effect”
In Romania the housing market seems to be at the peak of the cycle
High levels of fragmentation, asymmetry and polarization across the country, but
convergence from the prices’ trend point of view
Dependence on the First House Program and on the demand for investments’
purpose
Strong integration with the EU real estate market
A BUBBLE IN THE MAKING IN USA & GERMANY
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
Housing prices index in US & Germany
Housing price index in USA Housing price index in Germany (rhs)
Source: Federal Reserve database
MACROECONOMIC CLIMATE
STRONG GLOBAL MACRO-FINANCIAL CLIMATE
200
250
300
350
400
450
500
550
48
49
50
51
52
53
54
55
56
Sep
-13
No
v-1
3
Ja
n-1
4
Ma
r-14
Ma
y-1
4
Ju
l-14
Sep
-14
No
v-1
4
Ja
n-1
5
Ma
r-15
Ma
y-1
5
Ju
l-15
Sep
-15
No
v-1
5
Ja
n-1
6
Ma
r-16
Ma
y-1
6
Ju
l-16
Sep
-16
No
v-1
6
Ja
n-1
7
Ma
r-17
Ma
y-1
7
Ju
l-17
Sep
-17
Real economy vs. financial economy
PMI Composite MSCI Global (dr.)
Source: Bloomberg
US ECONOMY – THE MATURITY OF THE CYCLE
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
195
3
195
5
195
7
195
9
196
1
196
3
196
5
196
7
196
9
197
1
197
3
197
5
197
7
197
9
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
Labor productivity and employment in US
Labor productivity (%, YoY) Employment (%, YoY)
Source: BT based on US Bureau of Labor Statistics (BLS)
EU ECONOMY – AT THE PEAK OF THE CYCLE
-20
-15
-10
-5
0
5
10
15
20
25
30
35
Ma
y-1
3
Sep
-13
Ja
n-1
4
Ma
y-1
4
Sep
-14
Ja
n-1
5
Ma
y-1
5
Sep
-15
Ja
n-1
6
Ma
y-1
6
Sep
-16
Ja
n-1
7
Ma
y-1
7
Sep
-17
Investor confidence in Euro Zone
Source: Sentix
ROMANIA – THE CHAMPION OF GROWTH IN EU
-8
-6
-4
-2
0
2
4
6
8
10
199
6
199
7
199
8
199
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
GDP (%, YoY)
Euro Zone Romania
Source: Eurostat, BT forecasts
STRONG CONSUMPTION vs. LOW INVESTMENTS
-60
-40
-20
0
20
40
60
-15
-10
-5
0
5
10
15
20
2Q
05
4Q
05
2Q
06
4Q
06
2Q
07
4Q
07
2Q
08
4Q
08
2Q
09
4Q
09
2Q
10
4Q
10
2Q
11
4Q
11
2Q
12
4Q
12
2Q
13
4Q
13
2Q
14
4Q
14
2Q
15
4Q
15
2Q
16
4Q
16
2Q
17
Private consumption vs. fixed investments (%, YoY)
Fixed investments (rhs) Private consumption
Source: Eurostat, AMECO, INS
MID-RUN MACROECONOMIC SCENARIO
REAL ESTATE MARKET IN ROMANIA
The 4th sector in the economy (8.5% of GDP in 1H2017, below the UE average)
In the post-crisis cycle since 2012, after 4 years of adjustment
Residential market recovery supported by the First House Program, the
improvement of the real disposable income of the population and the decline of
the real financing costs
First House Program – a catalyst for the residential market – the Government
guarantees 50% of the loans, the advance is established at 5% and the interest rate
is capped at ROBOR 3M + 2.5pp
The residential market – an investment opportunity given the lack of alternatives
(low development of the financial market, low level of deposits’ rates)
The strong increase of the housing loans – 9.3% ytd to RON 63.9bn (around EUR
14bn) during 1-3Q2017, a record level
REAL ESTATE IN ROMANIA
A CONSOLIDATION PROCESS
-40
-30
-20
-10
0
10
20
30
40
50
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1Q 9
6
1Q 9
7
1Q 9
8
1Q 9
9
1Q 0
0
1Q 0
1
1Q 0
2
1Q 0
3
1Q 0
4
1Q 0
5
1Q 0
6
1Q 0
7
1Q 0
8
1Q 0
9
1Q 1
0
1Q 1
1
1Q 1
2
1Q 1
3
1Q 1
4
1Q 1
5
1Q 1
6
1Q 1
7
Value added in the real estate sector (%, YoY)
EU (28) Euroland Romania (rhs)
Source: Eurostat
HOUSING PRICES ON AN UPWARD TREND
0
20
40
60
80
100
120
140
160
180
200F
eb-0
4
Ju
l-0
4
Dec
-04
Ma
y-0
5
Oct
-05
Ma
r-0
6
Au
g-0
6
Ja
n-0
7
Ju
n-0
7
No
v-0
7
Ap
r-0
8
Sep
-08
Feb
-09
Ju
l-0
9
Dec
-09
Ma
y-1
0
Oct
-10
Ma
r-11
Au
g-1
1
Ja
n-1
2
Ju
n-1
2
No
v-1
2
Ap
r-13
Sep
-13
Feb
-14
Ju
l-14
Dec
-14
Ma
y-1
5
Oct
-15
Ma
r-16
Au
g-1
6
Ja
n-1
7
Housing prices index in Romania
Source: Imobiliare.ro
STABILIZATION OF THE RESIDENTIAL PERMITS
0
20
40
60
80
100
120
140
160D
ec-0
0
Ju
l-0
1
Feb
-02
Sep
-02
Ap
r-0
3
No
v-0
3
Ju
n-0
4
Ja
n-0
5
Au
g-0
5
Ma
r-0
6
Oct
-06
Ma
y-0
7
Dec
-07
Ju
l-0
8
Feb
-09
Sep
-09
Ap
r-10
No
v-1
0
Ju
n-1
1
Ja
n-1
2
Au
g-1
2
Ma
r-13
Oct
-13
Ma
y-1
4
Dec
-14
Ju
l-15
Feb
-16
Sep
-16
Ap
r-17
Residential building permits in Romania (index, MA12)
Source: Statistics Office (INS)
METHODOLOGY
METHODOLOGY
OLS
TRENDPRICES - F(TRENDREALINTERESTRATE, TRENDREALWAGES,
TRENDEUPRICES)
TRENDPRIVATECONSUMPTION - F(TRENDPRICES, TRENDREALWAGES)
TRENDPRICES = the trend component for the housing prices in Romania
TRENDREALINTERESTRATE = the trend component for the real interest rate
TRENDEUPRICES = the trend component for the EU housing prices
TRENDREALWAGES = the trend component for the real wages in Romania
Hodrick – Prescott filter
Quarterly statistics from Eurostat, Statistics Office, National Bank of Romania
(1999-2017)
E-Views
Min
2
1
*)(
T
t
tt YY +
1
2
2*
1
***
1 ))()((T
t
tttt YYYY
RESULTS
STRONG DEPENDENCE ON EU PRICES
95
100
105
110
115
120
125
130
09 10 11 12 13 14 15 16
TRENDPRICES TRENDEUPRICES
Source: estimates based on the methodology described above
REGIONAL CONVERGENCE IN TERMS OF PRICES
Source: Eurostat
75
80
85
90
95
100
105
110
115
120
125
1Q 1
0
2Q
10
3Q
10
4Q
10
1Q 1
1
2Q
11
3Q
11
4Q
11
1Q 1
2
2Q
12
3Q
12
4Q
12
1Q 1
3
2Q
13
3Q
13
4Q
13
1Q 1
4
2Q
14
3Q
14
4Q
14
1Q 1
5
2Q
15
3Q
15
4Q
15
1Q 1
6
2Q
16
3Q
16
4Q
16
1Q 1
7
Housing price index in Euroland and CEE
Euroland BG CZ HU PL RO
REAL ESTATE PRICES DEPENDENT ON REAL WAGES
Source: estimates based on the methodology described above
4%
5%
5%
6%
6%
7%
7%
8%
8%
9%
9%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4Q
10
1Q 1
1
2Q
11
3Q
11
4Q
11
1Q 1
2
2Q
12
3Q
12
4Q
12
1Q 1
3
2Q
13
3Q
13
4Q
13
1Q 1
4
2Q
14
3Q
14
4Q
14
1Q 1
5
2Q
15
3Q
15
4Q
15
1Q 1
6
2Q
16
3Q
16
4Q
16
1Q 1
7
Housing prices vs. real wages (trend)
Trend housing prices (%, YoY) Trend real wages (%, YoY) (rhs)
PRICES – INTEREST RATES – INVERSE RELATIONSHIP
Source: estimates based on the methodology described above 0%
2%
4%
6%
8%
10%
12%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4Q
09
1Q 1
0
2Q
10
3Q
10
4Q
10
1Q 1
1
2Q
11
3Q
11
4Q
11
1Q 1
2
2Q
12
3Q
12
4Q
12
1Q 1
3
2Q
13
3Q
13
4Q
13
1Q 1
4
2Q
14
3Q
14
4Q
14
1Q 1
5
2Q
15
3Q
15
4Q
15
1Q 1
6
2Q
16
3Q
16
4Q
16
Housing prices vs. real interest rates (trend)
Trend housing prices (%, YoY) Trend real interest rate (%, YoY) (rhs)
CONCLUSIONS
THE WEALTH EFFECT
Source: estimates based on the methodology described above
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
-15%
-10%
-5%
0%
5%
10%
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
Private consumption vs. housing prices (MA4, YoY)
Housing prices (%, YoY) Private consumption (%, YoY) (rhs)
THE HOUSING MARKET AT THE INFLEXION POINT
A starting point for studying the relation between the residential prices and the
real economy
The results in line with the economic theory - a negative dependence of the
housing prices on the real interest rate
The upward trend for the financing costs to impact the residential market in the
future and also the dynamics of the NPL loans
In Romania the housing prices highly dependent on the EU trend
Strong wealth effect in Romania – the increase of the residential prices
contributed to the strong dynamics of the private consumption
The persistence of the high risk perception, the expected change of the trend for
the housing prices, the continuity of the migration trend for the active
population may trigger the end of the post-crisis cycle earlier than anticipated.
DIVERGENT ERP TREND (RO vs. US)
Source: BT estimates
0
5
10
15
20
25
30
35
40
45
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
Sep
-07
Ja
n-0
8
Ma
y-0
8
Sep
-08
Ja
n-0
9
Ma
y-0
9
Sep
-09
Ja
n-1
0
Ma
y-1
0
Sep
-10
Ja
n-1
1
Ma
y-1
1
Sep
-11
Ja
n-1
2
Ma
y-1
2
Sep
-12
Ja
n-1
3
Ma
y-1
3
Sep
-13
Ja
n-1
4
Ma
y-1
4
Sep
-14
Ja
n-1
5
Ma
y-1
5
Sep
-15
Ja
n-1
6
Ma
y-1
6
Sep
-16
Ja
n-1
7
Ma
y-1
7
ERP RO vs. ERP US
ERP trend US ERP trend RO (rhs)
ERP TO CONTINUE THE UPWARD TREND …
Source: BT estimates and forecasts
5
10
15
20
25
30
35
40
45
2008 2010 2012 2014 2016 2018
ERPROMANIAF
