تخصیص پرتفوی دارایی واقعی: دیدگاه مصرف کنندگان اروپایی

Owner occupied housing facilitates household wealth accumulation and the stability of consumption in developed countries. It also contributes to other social goals. But owner-occupied housing is also a risky investment. This paper synthesizes existing knowledge about the riskiness of housing investment in European economies during the past quarter century. It also presents estimates of the potential gains to European consumers from investments in derivatives which may reduce risk at the individual level. We find that futures markets in house price indexes may increase portfolio returns for European investors by several percentage points at the same level of risk. We also consider practical steps to develop markets for these investments.

Owner-occupied housing plays a unique role in developed countries such as the United States and Western Europe. This role encompasses the mobilization of individual savings and the stimulation of consumption, as well as the contribution of housing to a variety of non economic outcomes such as the production of “social capital” in various forms. But owner-occupied housing is a risky investment. It represents a large fraction of household assets and net worth, and house prices have proven to be quite volatile, even in highly developed diversified economies. Thus, there are potentially large gains to policies which reduce the riskiness of investment in owner-occupied housing, especially for young households. This paper provides new quantitative evidence on the ability of well-designed housing derivatives to reduce the riskiness of housing investment at the individual level. This evidence is presented for ten developed countries: eight continental European countries, the United Kingdom and the United States. We find that there are potentially large gains to households from investments in house price indexes and in other forms of risk reducing derivatives. Although our estimates are uncertain and are based upon annual data and short time series, we find that the opportunity to invest in house price indexes consistently increases risk-adjusted portfolio returns by several percentage points, not by several basis points. In Section 2, below, we review the accumulating evidence on the unique role of housing in the economies of highly developed economies. In Section 3, we compare homeownership with investments in other forms of wealth, documenting the dominant position of home equities in wealth portfolios. In this section, we analyze the time series on housing prices for a panel of fourteen developed countries to document the riskiness of investment in modern industrial economies. Section 4 presents new evidence on the potential gains which a derivative market might achieve. We begin by reviewing the results for Sweden reported by Englund et al., in 2002. We then use data from the Global Financial Data Base, together with the panel of housing prices analyzed in Section 3, to extend this work to ten countries. We find large gains to policies which encourage the hedging of housing risk. Section 5 discusses some practical details in pursuing these policies, and it provides a brief conclusion.

The results reported for a panel of developed countries suggest that the ability to invest in house price derivatives increases investor returns, on average, by several percentage points for the same level of risk. The results also suggest that the probability that investor returns are decreased at any given level of risk is small—only for the Netherlands is the probability at all large. It would seem that there is a substantial benefit to gathering and processing the sort of information that would form the basis for replicable and routinely produced indices of housing prices—for a metropolitan area or region, or in some cases for an entire country. The obstacles to a functioning market that would allow European consumers to reduce the riskiness of their investment portfolios are partly technical and partly organizational. On a technical level, index development requires that there be a reputable and replicable method for building and publishing the house price index. And this requires large samples of data. It may thus be somewhat surprising to learn that sufficient data to publish such an index regularly is apparently routinely collected and is already available centrally for many industrial countries. Table 7 reports on the taxation of owner-occupied housing for OECD countries. As indicated in Panel A, at least eight countries have some form of national taxation on housing capital, and another eight countries administer some form of ad valorem tax at the local level. For those countries that tax housing nationally, it is necessary to have some centralized repository for housing data, typically including sales prices and the hedonic characteristics of dwellings. For Sweden, for example, all house sales are recorded and matched to the hedonic characteristics of dwellings in each region (see Englund et al. (1998)). Similar, but less detailed, information is recorded for dwellings in Norway. These data are used for tax assessment and mass appraisal by the authorities who administer national systems of property taxes. In principle, these data could be used to produce house price indexes for local or national markets using hedonic methods. Indeed, in some part, these data are already used by government officials to produce national and regional price estimates.3 It would seem to be a straightforward matter to publish the methods used to produce price estimates and to update price indices regularly—for wide distribution to the financial community. But for some countries listed in Table 8, it is true that houses are reassessed only irregularly for tax purposes. So developing a market for hedging housing risk would provide some incentives for more modernized assessment practices.For those countries which do not collect housing price and sales information nationally, the development of a credible and reliable house price index is a bit more complicated. For the US, house price indexes for local markets are estimated and reported by a national government agency.4 These data are reported quarterly for some 300 metropolitan areas and local markets. These indexes rely upon repeat sales (Case and Shiller, 1989) for the development of price indexes, rather than hedonic methods. Recent work has compared the implications of repeat sales methods with hedonic methods for the accuracy of price indexes (Clapham et al., 2006). The repeat sales index seems to perform well in comparison with a chained Fisher Index estimated using hedonic characteristics. In any case, the goal need not be a perfect representation of unobserved house prices, but rather an index which is reasonably accurate and easily replicable. Finally, it should be noted that in some countries without government centralized house price information (e.g., the UK), banks and financial institutions currently produce and distribute price indexes which are widely regarded as reliable and are used extensively in the financial community.5 The organizational barriers to establishing a market in house price indexes may be more formidable than the technical barriers. The advantages to portfolio investors, hedge funds and financial instructions of participating in this market are, perhaps, as obvious as are the advantages to consumers. By taking the long position, i.e., by buying the index from consumers, these institutional investors have, for the first time, direct access to investments in owner occupied housing, by metropolitan area, region, or country. This increases investment opportunities and reduces the aggregate risks to institutions. In developing a market, it is probably important to mobilize potential purchasers of these indexes—large institutions—as well as individual property investors. A form of this investment was offered for several years in the UK, before disappearing in 2004. Two firms, IG Index and City Index (see Tricks, 2003), offered investors the opportunity to purchase or sell an index of regional house prices, for settlement one to four quarters subsequently. These investments, an example of a rather common form of “spread betting” in the UK, permitted investors to hedge local housing prices, but only for short periods.6 The indexes for these “spread bets” were based upon the Halifax Bank of Scotland regional house price surveys and London land registry transactions. Trading in both these markets was thin and the products were withdrawn in 2004. One lesson from this experience is that it is important to induce portfolio investors and large institutions, not just individual investors and speculators, to develop a thick market. As a correlary, it is probably important to offer index positions longer than four quarters of duration in order to develop an orderly market. The recent announcement by Macro Securities and the Chicago Mercantile Exchange (CME) to begin trading on housing futures using repeat sales price indexes for ten large US metropolitan regions seems better designed to attract institutional investors, hedge funds, builders, and mortgage lenders. The advance publicity surrounding the announcement suggests that “A builder putting up a $100 million subdivision outside Chicago ready for sale in 2008 could buy puts on the Chicago housing index that expire in the summer of 2008. If the housing market plummeted and the company took a bath on the McMansions, it would recoup a chunk of the losses on the rising value of the puts.” (Gross, 2005). The article continues “But it’s unlikely that the people who could most benefit from hedging—individuals—will be big users. Why? These options will cover large markets—it will be tough to hedge the value of your own house, which depends so much on your particular neighborhood. The New York Index covers single family residential homes from the Jersey Shore to New Haven, Conn., a remarkably heterodox stretch….” The size of the contracts may be unsuitable for some individual household investors. The contract size as listed in the CME research report (Labuszwski, 2005) is about $65,000. With conventional margin requirements, this is a minimum investment of about $6500. It is now anticipated that trading on this derivative market will begin in 2006. Many investors and many homeowners have a stake in the success of markets such as these. And this success is at least as important for European homeowners as it is for US consumers.