Housing viability key for financial stability, growth: Study

08:17, January 21, 2011      

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Poorly managed housing markets played a key role in triggering financial crisis and might seriously cripple a global recovery, said a latest OECD reserach.

"Housing and the Economy: Policies for Renovation" has verified that reforms to financial regulation, taxation, land-use, rental rules and the provision of affordable housing are to renovate the real estate sector and improve the economy as a whole.

"OECD countries have seen the damage caused by badly designed policies through their effects on housing markets," said OECD Secretary-General Angel Gurria. "As we search for new sources of growth, as we seek to restore trust in our financial sectors, policies related to housing can have a huge impact on our future".

The Organization for Economic Cooperation and Development, based in Paris, says that easy credit over the past two decades amplified price volatility, with real housing price jumps of 90 percent or more in Australia, Belgium, Britain, Finland, Ireland, the Netherlands and Spain.

Deregulation and innovation in mortgage markets – coupled with inadequate supervisory regulation – contributed to a significant relaxation in lending standards, an increase in non-performing loans and the sub-prime crisis, which triggered the 2008 global financial meltdown.

The report, a chapter in the OECD's forthcoming Going for Growth publication, suggests that future innovations in mortgage markets be coupled with tighter regulatory oversight and prudent policies from the governments.

The report also recommends that governments increase new housing supplies to meet market demand, eliminate tax policies that favor housing sector over other industries and build more affordable social housing for the low-end income class of residents.

By Li Hong, People's Daily Online


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