املاک و مستغلات وبحران در آسیا

This paper suggests that activities in the real estate markets in Southeast and East Asian economies were an important contributing force to the financial crises of 1997 in the Asian economies. The analysis relies upon unpublished data reported contemporaneously by financial institutions and market watchers to document the extent of the imbalances in the real property market that were evident to informed observers at the time of the financial collapse. The analysis argues that a series of reforms in the regulation of the property market and the treatment of real property loans by financial institutions are necessary to prevent the recurrence of the kind of speculative bubble that contributed to the financial crises in Asia. Given the recentness of the crisis, the nature of the data, and the absence of definitive statistical sources, the results are tentative, but they are certainly consistent with a financial collapse whose proximate cause was unchecked activity in the property market.

The linkage between the real estate market and the general conditions of the economy has been studied extensively. However, most academic research is focused on the ways in which economic fundamentals affect property prices or the ways in which expectations about fundamentals affect property markets. (See Mankiw andWeil, 1989, for a celebrated example of this research.)2 Research also compares the importance of economic fundamentals, relative to the importance of history, in affecting outcomes in the real estate market. (See Quigley, 1999, for recent evidence.) Economic models arising from this line of research are capable of generating 1Presented at the Symposium honoring the memory of Steve Mayo at the ENHR Conference, Ga¨lve, Sweden, June 2000. This paper was originally prepared for the WDR 2000 Tokyo Workshop, November 1998, sponsored by the World Bank and the Overseas Economic Cooperation Fund of Japan. The paper benefited from the comments of Alan Bertaud, J.V. Henderson, and Shahid Yusuf and from the research assistance of Tracy Gordon. 2For another conspicuous example, the recent textbook by DiPasquale and Wheaton (1996) devotes a full chapter to explicating the linkage between fundamentals and expectations about fundamentals to property markets.patterns of price change over time in property markets in response to variations in economic conditions and to exogenous shocks. (See, for example, DiPasquale and Wheaton, 1992, or Case and Shiller, 1988.) There has, however, been much less attention given to the opposite line of causation—the potential for exogenous changes in property markets to affect the subsequent economic performance of the economy. This paper explores this latter line of causation with special reference to the collapse of the Southeast and East Asian economies in the late 1990s.We consider the potential effects of bubbles in the property market upon the broader economy and present some evidence suggesting that conditions in the real estate market played a major role in the rapid meltdown in Asian economies3 beginning in 1997. Given the lags in official statistics, especially in the developing world, most of the evidence presented below comes from private sources or from financial observers. Thus, the evidence is hardly definitive; nevertheless, the argument may be a cause for real concern. The concluding part of the paper presents some implications for policy— especially policy with respect to the real property market—which arise from this perspective.

Of course, overexpansion in the property market did not by itself cause the crisis which so devastated the Asian economies. Nevertheless, the eight generalizations described above suggest that the operation of the real estate market contributed in an important way to the collapse of the Asian economies and to their continuing problems during the past 2 years. The failures of the banking sector in oversight and underwriting and violations of arms-length trading conventions all contributed to a circumstance such that an exogenous shock could have disastrous consequences. It appears that part of the debacle can be attributed to the combination of outmoded banking practices and an immature market for real property. For example, in Thailand, Malaysia, and Indonesia, banking tradition dictated that all commercial loans required collateral; in an agrarian ecomomy real property— farmland—was the best and often the only collateral. The appraisal of the economic productivity of farmland is straightforward, and a loan can be advanced as some fraction of the appraisal. The agrarian tradition means that is difficult or impossible to use inventories, accounts receivable, or other modern forms of working capital as collateral. It also means that methods of appraisal of collateral are underdeveloped or nonexistent. When real property is the only form of collateral, there is an added incentive for a firm to build in an appreciating marketin order to borrow funds to expand. (This is an uncanny analogy to the Ponzi scheme described above.) The immaturity of the market means that much construction activity is undertaken, not by professional developers, but by firms intending to use the product themselves. These immature markets were characterized by weak foreclosure and property rights laws, which reduce the transparency of lending relationships and increasing risk. They were also characterized by measures to reduce competition, for example by laws prohibiting foreign individuals, foreign firms, and even joint ventures from owning land. For example, in China only a small subset of property is designated as “for sale on the overseas market.” In Vietnam, resident foreign nationals may own property only under quite restrictive rules, while fee simple ownership in Indonesia is reserved for Indonesian citizens (Heikkila, et al., 1998). Figure 12 presents a schematic produced by Ernst and Young suggesting the immaturity of various Asian property markets in 1998. Finally, this reduced competition concentrated lending activity as well as land ownership, which reinforced the phenomenon of connected lending. Modernization of the banking system to evaluate loans on real property using appraisal methods, to recognize other forms of collateral, and to increase competition are important. But it is also important to modernize rules governing title, to increase competition, and also to make bank lending transparent.The most immediate issue is what to do with the glut of existing bad debt and nonperforming property loans throughout the region. First, the definition of nonperforming must not be relaxed merely to make lending institutions appear to be more solvent. Until mid-1997, in contrast, Thai banks could classify a secured loan as “performing” even if no interest had been paid for a year. Indeed, this regulation was not changed until well after the $17.2 billion IMF bailout of the Thai economy had been booked. After the onset of the crisis, Malaysia chose to soften the definition of nonperforming loans, presumably to improve the balance sheets of local lending institutions (Goldman Sachs, November 12, 1998, p. 13). The problem with these cosmetic changes is that they make it more difficult to understand the true level of capital with which an institution is currently operating. Second, the nonperforming loans should be segregated from the rest of the banking system as a preferred alternative to lowering the capital adequacy standard imposed on the sector. One way to proceed could be modeled on the Resolution Trust Corporation which dealt with the assets of failed savings and loan institutions in the United States in the 1980s.Amore selective program would be the exchange of nonperforming loans by lending institutions for government bonds, similar to the Chilean model of the 1980s. Either approach would get the worst assets off the books of financial institutions and would encourage bankers to concentrate on their comparative advantage in finding portable opportunities for new lending. Over the longer run, improved functioning of the property market will require increased competition in the primary market and in financial intermediaries. There is little reason to prevent foreign nationals from owning real property; there is even less reason to stifle foreign competition in banking and lending.Increased capital standards, and the enforcement of those standards, can assist in the consolidation of the banking sector as well as in the enforcement of its soundness. The adoption and enforcement of accounting and disclosure standards and the closer supervision of underwriting standards are all difficult to implement costlessly, particularly in a sector that has been cartelized. But there are high returns to basic reforms. For example, in the current regulatory environment in Korea banks need not disclose suspect loans (let alone make provisions against their nonperformance). Finally, the discipline of competition could be furthered by the development of a secondary market for mortgage paper. The need to make transactions transparent and conformable, to facilitate securitization and sale to investors, has exerted a strong pressure to make underwriting standards more uniform in the United States and in other developed countries. We should expect some of these benefits to accrue from the securitization of property in Asia as well.