Latin America: Vulnerabilities Under Construction?
IMF Working Papers, July 1, 2012
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Bibliographic details
- Authors: Luis M. Cubeddu, Camilo E Tovar Mora, Evridiki Tsounta
- Published: July 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475505429.001
Summary
- Authors: Luis M. Cubeddu, Camilo E Tovar Mora, Evridiki Tsounta
- Date: July 1, 2012
- Scope: Documents developments in mortgage credit and the housing sector in Latin America over the past decade and compares them with those of other emerging economies.
- Central questions examined:
- (i) whether growth in mortgage credit is excessive compared to long-term trends;
- (ii) whether trends in house prices reflect changes in economic fundamentals;
- (iii) the extent to which household and banking sector vulnerabilities could lead to potential fragilities.
- High-level conclusion: While there are no imminent misalignments in the real estate and mortgage sectors, such misalignments could emerge if current trends persist. Strengthening supervision and addressing data gaps is critical to ensure adequate monitoring of risks and vulnerabilities.
Findings on mortgage credit and house prices
- The paper documents developments in mortgage credit and the housing sector in Latin America over the past decade and provides comparisons with other emerging economies.
- Analysis suggests:
- No imminent misalignments identified in the real estate and mortgage sectors.
- Potential for misalignments to emerge if current trends persist.
- Data limitations hamper rigorous trend analysis and the assessment of the degree to which house price trends reflect economic fundamentals.
Vulnerabilities and policy recommendations
- Key concerns:
- Household vulnerabilities that could interact with banking sector exposures.
- Banking sector vulnerabilities stemming from mortgage and real estate exposures.
- Policy recommendations:
- Strengthen financial supervision to monitor and mitigate risks in the mortgage and housing sectors.
- Address data gaps to improve the capacity for early detection and monitoring of vulnerabilities.
Data, scope, and limitations
- The analysis is constrained by data limitations, which reduce the ability to conduct a fully rigorous analysis of trends in mortgage credit and housing markets.
- Comparative approach includes other emerging economies to contextualize Latin America’s developments.