Philippe Bracke’s research while affiliated with Bank of England and other places

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Publications (20)


Housing Consumption and Investment: Evidence from Shared Equity Mortgages
  • Article

November 2021

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24 Reads

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6 Citations

Review of Financial Studies

Matteo Benetton

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Philippe Bracke

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João F Cocco

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We exploit a U.K. government-sponsored product and provide evidence on shared equity mortgages. The analysis shows how the interaction of house price growth and leverage regulation promotes product adoption. Following an increase in the equity limit, households use the additional financing to buy more expensive properties rather than reduce leverage. Equity used as a complement to debt is likely less beneficial for financial stability than when used as a substitute. Equity borrowers are less likely to change lenders when refinancing their senior debt. Finally, we measure the equity provider returns, which are affected by selection and undervaluation at repayment. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.


History Dependence in the Housing Market

April 2021

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13 Reads

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21 Citations

American Economic Journal: Macroeconomics

Using data on the universe of housing transactions in England and Wales over a 20-year period, we document that sale prices and selling propensities are affected by house prices prevailing in the period in which properties were previously bought. Using administrative data on mortgages, we show that cognitive frictions explain most of the history dependence in sale prices, whereas credit frictions are more relevant for selling propensities. We corroborate our analysis with data on online house listings, and we estimate the impact of history dependence on the collapse and slow recovery of housing market activity in the postcrisis period. (JEL E32, R21, R31)


How Much Do Investors Pay for Houses?

March 2019

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25 Reads

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20 Citations

Real Estate Economics

I combine housing sales from the England and Wales Land Registry with online rental listings from property portal Zoopla to identify buy‐to‐rent transactions—known as buy‐to‐let (BTL) in the UK. These sales are procyclical, concentrated in areas where the housing market is performing well, and more common for small dwellings. Comparing these transactions against all other housing sales in 2009–14 I show that BTL investors pay less than other buyers for the same properties. The heterogeneity of discounts across regions and property types is consistent with a simple theoretical framework that emphasizes the drivers of investors' and homeowners' demand for houses. This article is protected by copyright. All rights reserved




Additional statistics -Income variation for workers and entrepreneurs.
Mortgage debt and entrepreneurship.
Mortgage Debt and Entrepreneurship
  • Article
  • Full-text available

October 2017

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100 Reads

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36 Citations

Journal of Urban Economics

We study the link between mortgage debt and entrepreneurship using a model of occupational choice and housing tenure in a setting where loans are recourse—like in the UK and several US states. Our model shows that as long as the mortgage interest rate exceeds the risk-free rate: (i) mortgage debt diminishes the likelihood of entrepreneurship by amplifying risk aversion; and (ii) the negative relation between mortgage debt and entrepreneurship increases with income volatility. Our model also shows that the link between housing equity and entrepreneurship is ambiguously signed because of competing portfolio and wealth effects. We use the British Household Panel Survey to test and confirm the model predictions, and deal with unobservable heterogeneity employing three research designs—individual fixed effects, housing-spell fixed effects, and instrumental variables. A one standard deviation increase in leverage reduces the probability of entrepreneurship by 10–20 percent.

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The Time Value of Housing: Historical Evidence on Discount Rates

March 2017

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433 Reads

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33 Citations

The Economic Journal

Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing―the relationship between the price of a property and the term of ownership―over a hundred years and derive implied discount rates. For our empirical analysis, we compile a unique historical dataset (1987 to 1992) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples we find that leasehold prices are consistent with a time declining schedule and low long-term discount rates in housing markets. This article is protected by copyright. All rights reserved.


The Time Value of Housing: Historical Evidence on Discount Rates *

December 2016

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105 Reads

The Economic Journal

Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing-the relationship between the price of a property and the term of ownership-over a hundred years and derive implied discount rates. For our empirical analysis, we compile a unique historical dataset (1987 to 1992) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples we find that leasehold prices are consistent with a time declining schedule and low long-term discount rates in housing markets.


The Time Value of Housing: Historical Evidence on Discount Rates

January 2016

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10 Reads

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5 Citations

SSRN Electronic Journal

Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing — the relationship between the price of a property and the term of ownership — over a hundred years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987 to 1992) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples we find that leasehold prices are consistent with a time declining schedule and low long-term discount rates in housing markets.


History Dependence in the Housing Market

January 2016

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5 Reads

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20 Citations

SSRN Electronic Journal

Using the universe of housing transactions in England and Wales in the last twenty years, we document a robust pattern of history dependence in housing markets. Sale prices and selling probabilities today are affected by aggregate house prices prevailing in the period in which properties were previously bought. We investigate the causes of history dependence, with its quantitative implications for the post-crisis recovery of the housing market. To do so we complement our analysis with administrative data on mortgages and online house listings, which we match to actual sales. We find that high leverage in the pre-crisis period and anchoring (or reference dependence) both contributed to the collapse and slow recovery of the volume of housing transactions. We find no asymmetric effects of anchoring to previous prices on current transactions; in other words, loss aversion does not appear to play a role over and above simple anchoring.


Citations (15)


... Homeownership can act as collateral for financing a new business, increasing the likelihood of self-employment (Blanchflower and Oswald 2013), and reducing costs associated with setting up new business locations (Reuschke 2016). However, it may also deter (self)employment due to the risks associated with business failure (Bracke et al 2014;Chen and Hu 2018). Compared to men, HBS is more prevalent among women, offering flexibility in balancing paid and unpaid work (Thompson et al 2009;Aridakis et al 2014). ...

Reference:

Disentangling the gender-differentiated determinants of home-based self-employment choices in Nigeria
Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment
  • Citing Article
  • January 2014

SSRN Electronic Journal

... The lazy bank hypothesis states that collateral is not an effective measure against bankruptcy, but merely an easy way of handling SMEs (Manove et al. 2001). Still, as the bank retains the right to cancel a loan at any time, collateral, performance data and legitimacy represent significant obstacles to new enterprises (Bracke et al. 2013, De Clercq et al. 2013, Ramlall 2014. Because of the pivotal role of collateral, the size of the collateral also proves to be important. ...

Homeownership and Entrepreneurship: The Role of Commitment and Mortgage Debt
  • Citing Article
  • January 2013

SSRN Electronic Journal

... Housing status might act as a proxy for various dimensions of well-being, such as quality of life or as a status symbol, reflecting a person's achievements and social standing within a community [36,37]. Home ownership can be perceived as a psychological anchor, fostering a feeling of security and stability [50], as homeowners are less likely to live in deprived neighborhoods than renters and/or more invested in improving neighborhood conditions [51]. ...

History Dependence in the Housing Market
  • Citing Article
  • April 2021

American Economic Journal: Macroeconomics

... Conservation planners would likely be inclined to focus on areas where carbon-cost efficiency is highest for both future economic scenarios. Figure 4 illustrates the spatial distribution of expected (considering uncertainty) carbon-cost efficiency in 2046, given the probability of occurrence for each future growth condition (i.e., 0.5 for high-growth scenario and 0.5 for low-growth scenario), which are based on historical housing price peak and trough patterns (Bracke 2013). Overall, the figure shows that the clusters of counties in the upper 20th percentile of expected future carbon-cost efficiency are in eastern Kentucky, along the border between West Virginia and Virginia, in Virginia near the North Carolina border, and along the Cumberland Plateau in Tennessee. ...

How Long Do Housing Cycles Last? A Duration Analysis for 19 OECD Countries
  • Citing Article
  • January 2011

IMF Working Paper

... A further conceivable effect may be that households purchase different property types in response to the reform. For example, Gruber et al. (2020) and Benetton et al. (2019) show that subsidies and equity schemes encourage the purchase of larger and higher quality houses. While my estimations control for housing characteristics, a shift in housing characteristics may also be of interest as an outcome of the policy scheme. ...

Housing Consumption and Investment: Evidence from Shared Equity Mortgages
  • Citing Article
  • January 2019

SSRN Electronic Journal

... Finalmente, como parte de los efectos de estos procesos, se encuentra el avance de la política habitacional subsidiaria, que hoy se enfrenta a una fuerte escasez de terrenos disponibles debido a las alzas de los valores del suelo (Gasic Klett et al., 2022), y el aumento sostenido del déficit habitacional cuantitativo, ligado tanto con las alzas de valores de la vivienda, las barreras de acceso a un crédito hipotecario y los ingresos laborales proporcionalmente menores al valor de la vivienda .El escenario se complejiza ya que, debido a los procesos de financiarización, diversos fondos de inversión, personas jurídicas y personas naturales han optado por invertir en viviendas, siguiendo las dinámicas del buy to let (comprar para arrendar) (Bracke, 2021). En esta práctica, los grupos de mayores ingresos compran viviendas en sectores de menores ingresos para obtener las rentas de los arriendos por dichas viviendas (Vergara-Perucich y Aguirre-Nuñez, 2019). ...

How Much Do Investors Pay for Houses?
  • Citing Article
  • March 2019

Real Estate Economics

... In a similar vein, exploiting geographic variation in exposure to HtB, Tracey and van Horen (2021) find that HtB increased home sales and consumption of non-housing related items. Benetton et al. (2018) utilize the HtB equity loan scheme to investigate the pricing of mortgage credit, demonstrating that a lower down-payment is associated with a higher interest rate at origination, and a higher ex-post default rate. Lastly, Benetton et al. (2019) explore 3 See for example Bostic and Gabriel (2006), Gabriel and Rosenthal (2010) and Fetter (2013). ...

Down Payment and Mortgage Rates: Evidence from Equity Loans
  • Citing Article
  • January 2018

SSRN Electronic Journal

... Secondly, this study examines three potential mechanisms that explain how housing debt affects entrepreneurship. Prior research has highlighted the risk aversion mechanism, wherein housing debt diminishes the likelihood of engaging in entrepreneurial activities by fostering risk aversion among households (Bracke et al., 2018). Except for this mechanism, we provide and examine two additional mechanisms by which housing debt intensifies capital constraints and worsens credit limitations. ...

Mortgage Debt and Entrepreneurship

Journal of Urban Economics

... In addition, the PV systems and PV materials (like BIPVs) associated with infrastructures can be considered as building materials that will accumulate value to the property, and householders may have different perceptions and the consequences of the discount rate selection. A comprehensive view of the considerations for the discount rates and their varying perspectives in the framework of household financings are available in Refs [62][63][64], that can help the homeowner consider when estimating the financial aspects of PV systems. Furthermore, the homeowners can benefit from programs like the Low-Income Communities Bonus Credit (LICBC) which has been recently launched by the U. S. government to expand access to cost-effective and clean energy for underserved communities with tax offshoots for solar and wind projects across the nation. ...

The Time Value of Housing: Historical Evidence on Discount Rates

The Economic Journal

... Third, the absence of mortgage markets in Amsterdam indicate that models that build on mortgage credit constraints, as in Stein (1995) and Ortalo-Magne and Rady (2006), cannot account for the observed price-turnover relationship. Last, although beyond the scope of this paper, it is also very well possible that loss aversion (Genesove and Mayer, 2001) or other forms of history dependence (Bracke and Tenreyro, 2016;Hong et al., 2016) contributed to aggregate dynamics in prices and turnover. ...

History Dependence in the Housing Market
  • Citing Article
  • January 2016

SSRN Electronic Journal