Ageing and asset prices

by Előd Takáts

Working Papers No 318

August 2010

Abstract:

The paper investigates how ageing will affect asset prices. A small model is used to show that economic and demographic factors drive asset, and in particular house, prices. These factors are estimated in a panel regression framework encompassing BIS real house price data from 22 advanced economies between 1970 and 2009.

The estimates show that demographic factors affect real house prices significantly. Combining the results with UN population projections suggests that ageing will lower real house prices substantially over the next forty years.

The headwind is around 80 basis points per annum in the United States and much stronger in Europe and Japan. Based on the analysis, global asset prices are likely to face substantial headwinds from ageing.

JEL Classification: G12, J11

Link to: Working Papers No 318: "Ageing and asset prices"

GVA Grimley Expands Shopping Centre Management Team

GVA Grimley has expanded its Shopping Centre Management team further with the appointment of Grant Owens.

Grant joins the company from DTZ in Leeds where he worked for three years in retail asset management. Grant recently relocated to Manchester and was keen to join GVA Grimley due to its strong focus on retail management. He says: “With recent successes in the team and ever increasing profile of the schemes under management in the North West, I saw this as a great opportunity in bringing added value to the team”.

Jacqueline Flatley, Director of Property Management at GVA Grimley, comments: “Grant has made an excellent addition to our ever expanding Shopping Centre Management team, which now consists of a Director, Associate Director and two recently qualified surveyors, based in Manchester, with dedicated Property Management Accounts and Shopping Centre Management teams at the various centres. Grant recently attained MRICS status and we are sure that he will continue to grow from strength to strength within the company.”

CEBS’S statement on key features of the extended EU-wide stress test

Following its statement issued on 18 June 2010, CEBS provides further information on the EU-wide stress test exercise which is now being finalised by CEBS and the national supervisory authorities, in close cooperation with the ECB.

The objective of the extended stress test exercise is to assess the overall resilience of the EU banking sector and the banks’ ability to absorb further possible shocks on credit and market risks, including sovereign risks, and to assess the current dependence on public support measures.

The exercise is being conducted on a bank-by-bank basis using commonly agreed macro-economic scenarios (baseline and adverse) for 2010 and 2011, developed in close cooperation with the ECB and the European Commission.

The macro-economic scenarios include a set of key macro-economic variables (e.g. the evolution of GDP, of unemployment and of the consumer price index), differentiated for EU Member States, the rest of the EEA countries and the US. The exercise also envisages adverse conditions in financial markets and a shock on interest rates to capture an increase in risk premia linked to a deterioration in the EU government bond markets.

On aggregate, the adverse scenario assumes a 3 percentage point deviation of GDP for the EU compared to the European Commission’s forecasts over the two-year time horizon. The sovereign risk shock in the EU represents a deterioration of market conditions as compared to the situation observed in early May 2010.

The scope of the stress testing exercise has been extended to include not only the major EU cross-border banking groups but also key domestic credit institutions in Europe. The banks that have been included in the exercise are listed in the Annex. In each EU Member State, the sample has been built by including banks, in descending order of size, so as to cover at least 50% of the national banking sector, as expressed in terms of total assets. For the EU banking sector as a whole, the 91 banks represent 65% of the EU banking sector. Banking groups have been tested on a consolidated level. This means that subsidiaries and branches of an EU cross-border banking group have been included in the exercise as a part of the test of the group as a whole.

The results of the stress test will be disclosed, both on an aggregated and on a bank-by-bank basis, on 23 July 2010.

It should be noted that a stress testing exercise does not provide forecasts of expected outcomes, but rather a what-if analysis aimed at supporting the supervisory assessment of the adequacy of capital of European banks.