Browsing by Subject "construction"

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  • Kaaresvirta, Juuso; Kerola, Eeva; Nuutilainen, Riikka (2021)
    BOFIT Policy Brief 13/2021
    China’s real estate and construction sector has served as a major engine of economic growth in recent decades and the sector now plays an oversized role in the economy. Much of that growth has been debt-fuelled, with the indebtedness of developers climbing to unprecedented levels. After officials turned off the money spigot last year, housing markets cooled and a wave of financial difficulties washed over builders during autumn 2021. The entire sector found itself under heavy stress, and in December two major developers, Evergrande and Kaisa, defaulted on their offshore debt. In this brief, we consider the current conditions in China’s real estate and construction sector and how a possible sectoral crisis could spread to the national economy and the euro area. While the direct financial impacts on the euro area’s financial sector is likely to be minor, China’s real estate sector problems could spill over widely into the domestic real economy and thereby increase uncertainty internationally. In such case, the indirect impacts on the euro area could be severe.
  • Koskinen, Kimmo; Putkuri, Hanna (2018)
    Bank of Finland. Bulletin 2/2018
    Household indebtedness and overheating of the housing market have contributed to financial crises throughout history. However, a considerable proportion of banks’ losses during crises have resulted from corporate loans. The situation arises when indebted households cut down their spending during an economic downturn, increasing companies’ financial difficulties. The current situation in Finland is twofold: household indebtedness is record-high and has been increasing for a long time, but housing market developments have for the most part remained moderate. The percentage of loans related to housing and real estate is high.
  • Koskinen, Kimmo; Voutilainen, Ville (2021)
    Bank of Finland. Bulletin 1/2021
    Housing company loans are contributing to household indebtedness and are changing the composition of household debt. Housing company loans can also incentivise residential property investors to become highly leveraged. Imposing a loan-to-value limit of 60% on housing company loans would mitigate the issues associated with large housing company loans and make it easier to assess their risks. The impact of a loan-to-value limit would largely fall on owner-occupied housing output. Housing company loans are generally not used to finance the construction of rental housing. Imposing a loan-to-value limit on housing company loans might increase the number of pre-sales required by small construction companies or raise their borrowing costs.