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This paper examines how the macroeconomic environment affects the determinants of prepayment of mortgage loans from October 2004 to February 2020. For more accurate analysis, the authors define the timing of prepayment not only before the loan maturity but also at the time when 50% or more of the loan principal is repaid. The results show that, during the global financial crisis as well as the recent period of low interest rates, macroeconomic variables such as interest rate spreads and housing prices have a different effect compared to the normal situation. Also, significant explanatory variables, such as debt to income (DTI) ratio, loan amount ratio and poor credit score, have different effects depending on the macroenvironment. On the other hand, in all periods, the possibility of prepayment increases as comprehensive loan to value (CLTV) increases, and the younger the age, the shorter the loan maturity. The results suggest that, in the case of ultralong (40 years) mortgage loans recently introduced to support young people purchasing houses, the prepayment risk can be, at least partially, migrated by offsetting the increase in prepayment by young people and the decrease in prepayment due to long loan maturity. In addition, this study confirms that the accelerated time failure model compared to the logit model and COX proportional risk model has the potential to be more appropriate as a prepayment model for individual borrower analysis in terms of the explanatory power.

This study aims to investigate the existence of contagion between liquid and illiquid assets in the credit default swap (CDS) market around the recent financial crisis. The authors perform analyses based on vector autoregression model and the dynamic conditional correlation model. The estimation of vector autoregression models reveals that changes in liquid CDS (LCDS) spreads lead to changes in illiquid CDS spreads at least one week ahead during the financial crisis period, whereas the leading direction is reversed during the post-crisis period. Moreover, the results are robust after controlling for structural variables which are proven as determinants of CDS spreads and are empirically supported. This study interprets that information was incorporated first into the LCDSs because of the flight-to-liquidity during the recent crisis period but there is a default contagion effect by reflecting illiquidity-induced credit risk after the crisis. Finally, the dynamic conditional correlation analysis also confirms the main results.

This paper aims to enhance the impact of incorporated waqf institutions by blending their resources to promote responsible small businesses that are inclusive of human development, service to society and preservation of ecological environment and other species. This is expected to shift the paradigm of businesses from the current waste-oriented linear economy to ideally a zero-waste circular economy.

This is an analytical study building on the experience of European Venture Philanthropy Organizations (VPOs) that work with the primary objective of making impactful businesses successful, with capital protection and return on investment being of secondary concern. This paper suggests an incorporated institutional design that blends resources for promoting responsible businesses using a new hybrid financial mechanism, namely, equity-at-default (EaD) to replace collateral and foreclosure requirements with responsibility and compassion.

The research calls for changing the business paradigm from linear to circular, an incorporated institutional framework for venture waqf, purpose of the waqf to make impactful small businesses successful and designing a financial contract to loan in favor of responsible businesses that convert to equity stake for the waqf in case of default (EaD) replacing collateral and foreclosure requirements.

This is a theoretical study motivated by the success of VPOs but assigns a new role to waqf institutions. Furthermore, the incorporated nature of waqf is a new idea and EaD is a new mechanism. Being new, these ideas have the risk of not being implemented. However, the broader message that waqf shall promote businesses that are inclusive of ecological concerns is generally applicable.

The paper has a significant practical implication to transform the responsibility and consciousness of businesses. Waqf is fundamentally a compassionate institution, and it must enhance the responsibility of businesses to become more inclusive of the environment and other species. It should also become more compassionate toward businesses that are in distress and default. In this sense, the paper tries to internalize compassion in financial contracting that can potentially change the architecture of lending.

Altering businesses’ mindset from a waste-driven extractive linear economy to inclusive circular economy has a tremendous transformative role. This will have implications for enhancing business consciousness and responsibility. As poverty is a phenomenon of state of mind, changing the society’s state of thought in Muslim communities is expected to have basic positive implications. Entrepreneurs with a new mindset can have far-reaching positive impacts on the society.

The paper offers potentially innovative perspectives in four key areas and blends the different resources in an incorporated waqf that makes responsible entrepreneurs assume a partnership role in times of distress through EaD. Furthermore, the integration of compassion in financial contracting could have better implications for return on investment as well. The ideal state of an economy is where waste is turned into wealth and well-being is something that all policymakers must keep on the top of their agendas.

Homeownership provides shelter and is a vital component of wealth, and house purchase signifies a lifetime achievement for many households. For South Africa confronted with social and structural challenges, homeownership by the low and lower middle-income household is pivotal for its structural transformation process. In spite of these potential benefits, research on the affordable housing market in the context of South Africa is limited. This study aims to contribute to this knowledge gap by answering the question “do changes in household income per capita have a symmetric or asymmetric effect on affordable house prices?”

A survey of the international literature on house prices and income revealed that linear modelling that assumes symmetric reaction of macroeconomic variables dominates the empirical strategy. This linearity assumption is restrictive and fails to capture possible asymmetric dynamics inherent in the housing market. The authors address this empirical limitation by using asymmetric non-linear autoregressive distributed lag models that can test and detect the existence of asymmetry in both the long and short run using data from 1985Q1 to 2016Q3.

The results revealed the presence of an asymmetric long-run relationship between affordable house prices and household income per capita. The estimated asymmetric long-run coefficients of logIncome[+] and logIncome[−] are 1.080 and −4.354, respectively, implying that a 1% increase/decrease in household income per capita induces a 1.08% rise/4.35% decline in affordable house prices everything being equal. The positive increase in affordable house prices creates wealth, helps low and middle-income household climb the property ladder and can reduce inequality, which provides support for the country’s structural transformation process. Conversely, a decline in affordable house prices tends to reduce wealth and widen inequality.

This paper recommends both supply- and demand-side policies to support affordable housing development. Supply-side stimulants should include incentives to attract developers to affordable markets such as municipal serviced land and tax credit. Demand-side policy should focus on asset-based welfare policy; for example, the current Finance Linked Income Subsidy Programme (FLISP). Efficient management and coordination of the FLISP are essential to enhance the affordability of first-time buyers. Given the enormous size of the affordable property market, the practice of mortgage securitization by financial institutions should be monitored, as a persistent decline in income can trigger a systemic risk to the economy.

The study results illustrate the importance of homeownership by low- and middle-income households and that the development of the affordable market segment can boost wealth creation and reduce residential segregation. This, in turn, provides support to the country’s structural transformation process.

The affordable housing market in South Africa is of strategic importance to the economy, accounting for 71.4% of all residential properties. Homeownership by low and lower middle-income households creates wealth, reduces wealth inequality and improves revenue collection for local governments. This paper contributes to the empirical literature by modelling the asymmetric behaviour of affordable house prices to changes in household income per capita and other macroeconomic fundamentals. Based on available evidence, this is the first attempt to examine the dynamic asymmetry between affordable house prices and household income per capita in South Africa.

Acknowledging that housing forms a large part of households’ and country’s long-term wealth, the South African Government has implemented various housing-related policies towards that end. Among these, the government has extended transfer duty exemption to house buyers – both individuals or natural persons and companies or other parties – to enable them buy houses of their choices since January 1950 to date. This paper aims to investigate the relationship between historical transfer duty exemption and housing demand in the City of Johannesburg (CoJ) over a longer period, where a comprehensive data set on house sales and other predictors was available.

This paper uses multi-year data on repeat house sales from 2010 to 2020 and other macro- and socio-economic variables to test the relationship between transfer duty exemption and housing demand in the CoJ, a core part of Gauteng province, South Africa. After cleaning the original data, final analysis was based on 139,121 repeat sales transactions. Data was analyzed in R.

Findings suggest that, when macro-, socio-economic and yearly effects are controlled, transfer duty has a damping effect on housing demand in the CoJ. The results were consistent across all the estimated models. While the motivation behind the implementation of transfer duty exemption in South Africa continues to encourage home ownership, these findings are unexpected because they do not offer support to that policy intention. These unexpected results are partly explained by the prevailing complexities of the housing market and related policies and the progressive tax regime. However, there are welfare effects that all buyers achieve across the housing market ecosystem.

This paper extends work on housing markets research in South Africa through the investigation of mortgage-based housing market in the CoJ that presents one of the densest, developed, bustling and growing housing market in the country. It also presents a fertile ground where all the effects of all the housing policies coalesce – in the statistical sense, one can control the effect of some aspects of housing policies, while appropriately testing the link between a specific policy (in this case, transfer duty exemption) and housing dynamics.