It was originally believed that a Government can influence the status of real estate in terms of change, growth and development. Recently this notion was challenged by Tuuli Kouki of Japan who after researching over the effect of Government policies on real estate arrived at the conclusion that there is very little effect.
Using econometric analysis Tuuli Kouki found that “neither monetary nor fiscal policy had notable effect on the real estate sector, especially price development. On the other hand, interest rates were seen as a most notable government policy tool to have an effect on the real estate sector.”
Moreover he went on suggesting that government policies, “having an indirect effect on the real estate market via altering the demand and supply for real estate rather than leading to changes within the sector directly.
What matters here is that public policy has very limited role in bringing about changes within the sector which task comes under the ambit of the private sector business policy.
While local government bodies employing tools such as allocation of plots, zoning, licensing of real estate developers, rules and regulations could contribute a lot in realty growth it is left with private sector to craft business policies in cooperation with local authorities, housing banks and other long term lenders to ensure equitable growth.
Much hope is placed on a key paradigm that ensures there is no negative value of finished houses. As you are aware negative value arises when houses are bought during boom time at high prices and as slump occurs the asset value goes down much lower than the debt payable over houses mortgaged.
Linking the dots above business policy must ensure that local authorities or central government comes with subsidies to lower income households that are severely affected during realty slump!
Cheers!
Muthu
Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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