The goal of this thesis is to find and to analyze the factors that ignited the housing bubble across different countries and to apply them to the German mortgage market. The reason for research is that the global financial crisis emphasized the risks associated with real-estate booms.
In any great financial crisis, the mortgage boom was buoyed by the housing rise and economic activity. When that spiral inverts, falling house prices make tightened lending standards, which bring to widespread failures and debt overhang. The consequences are recessions and high surges in public debt. The thesis is composed of four chapters, each of them dealing with different perspectives of housing boomlet and macro-financial factors.
The purpose of this thesis is to define whether there are also housing bubbles within the German mortgage market, as well as to find out which factors prevent Germany from a housing bubble. In order to do so, secondary data from prestigious financial institutes will be analyzed. The result is that there is no housing bubble in Germany at the national level, but that there has been a housing bubble in several cities. Fusions of macroprudential policy (loan-to-value), monetary policy (interest rate) and other housing financial characteristics (term to maturity, cost of registering property, and tax deduction) are buffers to stop housing boomlet. In conclusion, the German mortgage market has not been affected by the United States’ housing bubble because of the difference in manipulating macroprudential policy and housing financial characteristics.
Table of Contents
I. Chapter 1: Introduction
1. The rationale for the topic
2. Research aim
2.1 Research questions
3. Methodology
3.1 Research procedure
3.2 Research philosophy
3.3 Research approach
3.4 Characteristics
3.5 Research strategy
3.6 Research design
3.7 Validity, reliability and ethical considerations
II. Chapter 2: Literature Review
1. European Central Banks’ onetary policy
1.1 Understanding the European Central Banks (ECB) regulations/ mechanism
1.2 ECB’s objectives
1.3 Task and responsibility
1.4 History of European Central Bank
1.5 Monetary policy of European Central Bank
1.6 Side Effects of Monetary Policy on financial stability
2. Macroprudential policies
2.1 Macroprudential tools that affect credit supply
2.2 Macroprudential tools targeting credit demand
2.3 Practical applications of prudential methods: Toolkits
2.3.1 Toolkits used to get over overlaps on borderline of the policies
3. What a housing market bubble is and the consequence
4. Case study of “Spanish housing bubble”
5. Case study of “housing finance and real-estate booms.”
5.1 Factors associated with cross-country differences in mortgage markets
5.2 Credit boom and house-price boom
5.3 Types of credit booms
5.4 Can we tell bad real-estate booms from the good sign?
5.5 Can credit booms help predict house-price booms?
6. Case study of “Speculative price bubble in Urban housing market in Germany.”
7. Report of “Empirica-Blasenindex I/2014”
III. Chapter 3: Discussions
1. Analysis of housing markets in two biggest economies: the United States & China.
1.1 The United States
1.2 China
2. Germany vs. Spain housing bubble in the case study of Spanish housing bubble.
3. Discussion on the case study of housing finance and real-estate booms
4. Discussion two resources “Speculative Price Bubbles in Urban housing Markets in Germany” & “Empirica-Blasenindex I/2014”
5. Discussions ECB’s monetary policy, together with macro-prudential policy.
IV. Chapter 4: Conclusion
1. Introduction
2. Conclusion in research objective
3. Conclusion in research aim
4. Limitation of the study
5. Opportunity for further research
6. Recommendation
Research Objectives and Thematic Scope
This thesis examines whether the German mortgage market has experienced a housing bubble between 2000 and 2013 and investigates the factors that help prevent such occurrences. By analyzing secondary data from financial institutions like the IMF and BIS, the research explores the influence of monetary and macroprudential policies, as well as structural housing market characteristics, on overall market stability.
- Analysis of housing market bubbles in major global economies.
- Evaluation of macroprudential policies and their impact on housing credit.
- Comparison of German housing finance characteristics against international standards.
- Assessment of whether German housing market movements are speculative or driven by fundamentals.
- Determination of effective buffer mechanisms to maintain housing market stability.
Excerpt from the Book
1. The rationale for the topic
Germany economy is the strongest economy in the Eurozone, their debt is not particularly high, and they have an enormous amount of products to offer the global markets. The financial market plays a role in performing the essential function of channeling funds from economic players that own surplus funds to those having a shortage of funds. In other words, it allows funds are moving from an economical player who lacks productive investment opportunities to people who have such opportunities. However, the financial crisis is always a shadow of every economy, and housing bubble indirectly is the cause of systemic financial crises. As a consequence, this dissertation firstly would like to scrutiny the X-factors that might be the cause of housing bubble cross countries. It then finds the answer whether or not German mortgage market drops into housing bubble for the periods approximately 2000s – 2013s. As a perspective of a graduate for Master Degree International Management specialized in Finance and Accounting, this thesis contributes a broad range of knowledge for understanding how mortgage market work, also for financial career.
Summary of Chapters
I. Chapter 1: Introduction: Outlines the research rationale, objectives, questions, and the methodology used to analyze the German mortgage market.
II. Chapter 2: Literature Review: Reviews relevant literature on ECB monetary policy, macroprudential tools, and existing case studies regarding housing bubbles in Spain and Germany.
III. Chapter 3: Discussions: Analyzes global housing market trends and compares them with the German context, focusing on the effectiveness of existing regulatory policies.
IV. Chapter 4: Conclusion: Summarizes the findings, confirming the absence of a national housing bubble in Germany, and provides recommendations for future research.
Keywords
Housing bubble, German mortgage market, Macroprudential policy, Monetary policy, Financial stability, Credit boom, Loan-to-value ratio, Interest rate, Residential property, Real estate, Economic stability, Household debt, Eurozone, Speculative bubble, Financial crisis.
Frequently Asked Questions
What is the primary focus of this thesis?
This work fundamentally investigates the existence of a housing bubble in the German mortgage market during the period from 2000 to 2013 and analyzes the mechanisms that help ensure its stability.
What are the core thematic areas?
The study centers on European Central Bank (ECB) monetary policies, macroprudential regulatory tools, comparative case studies of housing bubbles, and the analysis of housing finance characteristics.
What is the main research question?
The research asks whether the German mortgage market is currently confronting a housing boomlet and identifies which specific buffers, such as LTV ratios or interest rate policies, help avoid bubble occurrences.
Which scientific methods are employed?
The paper utilizes a qualitative research methodology based on secondary data analysis, synthesizing academic resources, case studies, and statistical evidence from organizations like the IMF, BIS, and the Empirica Institute.
What does the main body address?
The main part of the thesis reviews relevant literature on housing bubbles, discusses the impacts of ECB monetary and macroprudential policies, and provides a detailed analysis of Germany's housing market indicators compared to international counterparts.
Which keywords best describe this research?
The work is characterized by terms such as housing bubble, German mortgage market, macroprudential policy, financial stability, and credit boom.
How does the German mortgage market differ from the U.S. model?
The research highlights that while the U.S. market experienced a severe bubble due to high LTV and lax standards, the German market remains safer due to higher LTV constraints, full recourse lending, and different tax treatments of mortgage interest.
What is the conclusion regarding a housing bubble in Germany?
The thesis concludes that there is no housing bubble at the national level in Germany, although some specific urban areas have shown signs of speculative price movements.
- Arbeit zitieren
- Teddy Pham (Autor:in), 2018, On the Factors Causing a Boomlet Across Different Countries. A Case Study of the German Mortgage Market, München, GRIN Verlag, https://www.grin.com/document/451808
