Jean-Baptiste Coulomb (p), Arnaud Simon, Fabrice Larceneux

Context :

A Viager real estate transaction, which can also be called a “lifetime annuity real estate” transaction, consists in selling a property in return for a down payment and a lifetime annuity that the buyer has to pay until the seller dies. Older than 200 years old, the viager product is used and standardized today in many countries such as France, Belgium, Italy and Spain. The viager is a subject that is not very talked about, but with the increase of life expectancy and the apparition of a new generation of elder-boomers, it has become an additional way for the elderly to complete their retirement. Combined with the low interest rates environment and the pensions stagnation, the viager can be a complementary product to pensions as the pensions level and the use of ownership as a source of old-age income are negatively correlated.
The paper explores in the first part the relationship between people and the viager product which reverses the relation to property and housing, and in the second part the presence of asymmetric information and the lack of financial knowledge from a part of the population.

Methodology:

The analysis is based on 52 interviews, approximately 45 minutes each, made in different region of France between 2016 and 2017. The paper distinguishes and explores the perception of the product for buyers, sellers, and brokers, which are the three agent categories interviewed. A qualitative analysis software package, NVivo, has been used to organize some ideas and to obtain details by categories about some results.

Results :

Many results have been found through this qualitative analysis. The first impression is that the viager product concerns the others, is an old thing that should not have changed much, and is a non-ethical solution, a “bet on death” which is against the concept of inheritance. On the contrary, brokers seem convinced by the product, but think that communication efforts must be done, and in different proportion if the properties are located in large cities or in province. The buyers and the sellers have their own objectives, which differs given the location and the family status. The presence of asymmetric information is also highlighted, with a reversal of the classical real estate cycle in which sellers are better informed than the buyers.

Ruxiang Wee (p), Annie Tubadji

Mass culture is not expensive, but it is a powerful tool to create social perceptions about the behavior of the rich people and the possessions signaling of richness. Therefore, we hypothesize that the imaging of Korean richness in Korean soup operas influences the conspicuous consumption in Malaysia associated with cosmetic products. We have gathered primary data for young Malaysian females (below 50 years of age) and their customer behavior with regard to cosmetics. Regression analysis shows that high education is associated with more intensive watching of Korean soap operas, which confirms their importance for people with higher social aspirations. Next, we find that higher consumption of Korean cosmetics is highly dependent on the frequency of watching of Korean soap opera. We also find that our respondents view the Korean society as richer than the Malaysian one. They perceive the Korean life-style as higher quality and they report that this is clearly a question of prestige and not a question of quality. Finally, we find that people who are not interested in the social perception of their income level are also less likely to buy Korean cosmetics. Our results are important in two ways: (i) they demonstrate the ability of mass culture to affect the trade in certain industries between countries and (ii) we find special significance of advertisement during mass-culture on this type of effect. Therefore, we consider our findings in support of the Culture-Based development concept, which suggests that the cultural factor affects economic outcomes and that this cultural factor is not just historically inherited but also man-made in the current moment.

Boris A. Portnov (p), Yosi Borochov

Mortgage credit default risk in Israel currently stands at about 6% of the total monthly mortgage payments. Considering the scope of this phenomenon, it is important to determine how the probability of mortgage default (MD) can be reduced and what factors may affect it. Some of these factors, such as income, age, and education are well-known, while other potential risk factors, especially those related to the security situation and environmental health hazards, have been less thoroughly investigated. The present study aimed to determine whether (and to what extent) socio-economic parameters, security risks and environmental risk factors affect the financial survival of mortgage borrowers in Israel. The study was based on the mortgage credit database of a major commercial bank and the study population consisted of about 90,000 mortgage borrowers who took mortgages from the bank between 2010 and 2011. The analysis was performed using binary logistic models, aimed to estimate the relative contribution of different factors on MD. The study focused on two main environmental variables that have been not examined until now -- security risks and air pollution. Both groups of variables were found to be significant determinants of MD. The explanation proposed is that areas under missile threat are unattractive for investment and are likely to experience out-migration of well-to-do residents. In the absence of savings, the remaining residents may have difficulties to make routine mortgage payments. In addition, air pollution may affect the financial ability of mortgage borrowers, because residents of polluted areas are likely to exhibit higher rates of morbidity, resulting in the absenteeism from work due to illnesses. In turn, poor health status of the borrower is likely to affect mortgage survival, while insurance companies are likely to raise premiums or even refuse to insure customers in poor health conditions.

Elias Oikarinen (p), Steven Bourassa, Martin Hoesli, Janne Engblom

We derive a spatial equilibrium model of the relationship between house prices and personal income. We then explore the implications of the model using data for the 50 largest U.S. Metropolitan Statistical Areas (MSAs) and applying modern panel analysis tools that allow for geographic heterogeneity and control for spatial dependence. Both theory and empirical findings indicate that simple ratios of regional house prices to personal incomes are not good indicators of house price bubbles because they tend not to be stable in the long run. In contrast, panel regression models yield stationary long-term relationships in most MSAs indicating that such regressions work well when assessing regional house price levels. We further show that the relationship between house prices and incomes varies across locations, demonstrating the importance of using estimation techniques that allow for geographic heterogeneity.