OECD: High property prices hinder exports

[BoyRacer]

EXPORTS AND PROPERTY PRICES IN FRANCE: ARE THEY CONNECTED? -> olis.oecd.org/olis/2010doc.n … 282018.PDF

ABSTRACT/RESUME
Exports and property prices in France: are they connected?
France has seen a marked deterioration in its export performance in the last 10 years or so. Previous empirical research pointed out that weak export performance was due to i) vigorous domestic demand; ii) lower mark-ups due to head-to-head competition with Germany; iii) low non-price competitiveness of French export goods; iv) offshoring of entire production processes (especially in the automobile sector); and v) difficulties of French manufacturing firms to reach critical size for exporting. This paper adds an additional explanation to this list.
We argue that resource reallocation from the exporting to the construction sector triggered by fast rising property prices hindered France to meet world export demand vis-à-vis its products. Our econometric analysis shows that the resource reallocation argument helps explain French export performance between the early 2000s and 2007, unexplained by traditional models. **This result is confirmed for a set of OECD countries that experienced a marked decline in their export performance and sustained real-estate boom after 2000.
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[BoyRacer]

Blowing Bubbles – and Bursting Them: Ireland and Spain -> nuigalway.ie/ecn/resrch/pdf/event_131.pdf

1. Housing markets are idiosyncratic
   Over the last thirty years the housing market has been a source of significant economic instability on at least one occasion in each of a wide range of OECD economies. When housing bubbles have burst they have caused substantial damage to the affected economy. As a result, they ought to be a cause for concern for economic policy makers. On some occasions when housing bubbles have burst they have also been associated with significant disruption to the domestic financial system (e.g. in the mid-west of the US in the mid 1980s and Scandinavia, 1989/1990). Any such financial sector disruption greatly magnifies the macro economic disruption which is caused by a housing sector collapse (Honohan and Klingebiel , 2003).
   The analysis carried out in Girouard (2006), indicates that when housing bubbles have occurred they have been essentially idiosyncratic in nature – they have generally not occurred simultaneously across major regions of the OECD. The analysis in Himmelberg et al (2005) also indicates that in the US there has not been a “US housing bubble” but rather a series of local bubbles in individual cities or regions at different times over the last quarter of a century.

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[superman]

Of course! High property prices cause un-competitiveness! Why didn’t we realise it before!

[Ivor_Lot]

Of course! High property prices cause un-competitiveness! Why didn’t we realise it before!

zzIt always seemed blindingly obvious to me.