UP701 Introduction to Urban Economics
*LEC7* Financialization
2021 1130
Assoc. Prof. Holger Gladys
Belgrade’s €3.5bn Waterfront Project in 2015
https://www.belgradewaterfront.com/en/press/press-photos/
Belgrade’s €3.5bn Waterfront Project in 2015
https://www.belgradewaterfront.com/en/press/press-photos/
Belgrade’s €3.5bn Waterfront Project in 2015
Belgrade Waterfront has one goal and one goal only – to rejuvenate Belgrade’s economy,
and with it the economy of the whole country.
The potent investor and developer is the Abu Dhabi-based real estate investment and
development company Eagle Hills, whose chairman is Mohamed Alabbar, the founder of
Emaar Properties (United Arab Emirates), the company that built the world’s largest
shopping mall and the tallest building in the world, the famous Burj Khalifa.
This massive project will provide a plethora of job opportunities and will be packed with
apartments, condominiums, hotels, offices, retail shops, malls and parks, while it will
also feature a mammoth of a glass skyscraper that is supposed to be the tallest one in
this part of Europe.
The plan is to: provide home to over 14,000 people create more than 20,000 jobs create
offices for 12,000 people. The complex will span over 100 hectare, while the total
construction area spreads over 1.8 million square meters and along the beautiful and
economically prolific Sava riverbank.
https://bizzmarkblog.com/belgrade-waterfront-project/ James D. Burbank on June 15, 2018
Belgrade’s €3.5bn Waterfront Project in 2015
Aside from the [168 meters] gigantic glass skyscraper [by the US-American architecture
firm SOM Skidmore, Owings & Merrill that houses the luxurious St. Regis Belgrade hotel
plus apartments advertised as privileged lifestyle experience], the new district features:
world-class residences, top-drawer business offices, influential educational institutions,
modern healthcare amenities, top-notch cultural venues, cozy cafes and restaurants,
exclusive hotels, premium condos, top-quality leisure attractions, lush parks, and
necessary parking lots.
This should make Belgrade Waterfront the biggest shopping and lifestyle destination in
the Balkans [with tax-free shopping for foreigners] and is bound to become one of the
strongest business and touristic hubs in all of Europe.
The project will attract big investors, provide local citizens with valuable job
opportunities, act as a major catalyst for Serbia’s tourism and fuel the growth of the
country’s economy with its holistic approach to the city’s development.
https://bizzmarkblog.com/belgrade-waterfront-project/ James D. Burbank on June 15, 2018
Belgrade’s €3.5bn Waterfront Project in 2015
https://www.theguardian.com/cities/2015/dec/10/belgrade-waterfront-gulf-petrodollars-exclusive-waterside-
Belgrade’s €3.5bn Waterfront Project in 2015
LAUDATIO The most valuable part of the Serbian capital has experienced a revival in
the last few years. Thanks to the synergy of Abu Dhabi-based Eagle Hills and the Serbian
Government, Belgrade Waterfront is today recognized as a place that unites the highest
housing standards, first-class retail, cultural events and entertainment for all visitors
and residents.
This unique feature of the Serbian capital gained a new dimension over the past four
years, providing a new concept of living and leisure to its residents and visitors with the
realization of the biggest infrastructural project in the city’s history – the waterfront.
“Belgrade Waterfront is so much more than an urban solution to revitalize the Sava
riverfront and the old city. It is a manifestation of the modern vision of Belgrade as a city
of infinite possibilities. It is a fusion of the world’s metropolises we long to visit – a
comfortable, healthy, and sustainable way of life we strive to achieve in this
contemporary world, and new business potentials that have waited way too long for
better times to come to be fulfilled. That time has finally arrived”, says Ivana Lukić, the
Head of Marketing at Belgrade Waterfront. The conclusion is clear – every city needs a
project such as this one as a catalyst to attracting foreign investment, enticing tourism
and boosting the economy while offering citizens a completely new lifestyle.
http://www.diplomacyandcommerce.rs/belgrade-waterfront-is-a-success-story/ Februar 10, 2021 Tanja Banković
Belgrade’s €3.5bn Waterfront Project in 2018
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2018
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2018
Barbara Surk, April 2018, Remodeling Serbia’s Capital, With Bulldozers and Baseball Bats
CRITIC The project of luxury skyscrapers and sprawling shopping malls has become a
symbol of the plan of Serbia’s president, Aleksandar Vucic, to give the city “a new
identity,” removed from the country’s militant past and international isolation.
Mr. Vucic — an ultranationalist during the Balkan wars of the 1990s who turned into a
pro-European reformer as he gained more political power — aims to achieve his goal
with borrowed money and revenue from the sale of state land to wealthy bidders from
Russia, China and the Gulf States.
Critics say the Serbian government is letting nothing stand in the way. “They are
determined to take us into the future, bulldozing their way there so we can reach the
kind of future they have in mind for us,” said Dobrica Veselinovic, the leader of the
opposition movement, known as Let’s Not Drown Belgrade, which has held street
protests against the project.
In the view of officials, the protesters miss the broader goals of the waterfront’s
redevelopment. “We want to restore Belgrade to its former glory and make it a great,
respectable city again after years of shame that came with wars and unrest,” said the
mayor of Belgrade, Sinisa Mali.
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2018
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2018
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2018
https://www.nytimes.com/2018/04/29/world/europe/serbia-belgrade-waterfront-uae-aleksandar-vucic.html
Belgrade’s €3.5bn Waterfront Project in 2021
https://www.belgradewaterfront.com/en/press/press-photos/
Belgrade’s €3.5bn Waterfront Project in 2021
https://www.belgradewaterfront.com/en/press/press-photos/
Belgrade’s €3.5bn Waterfront Project in 2021
https://www.belgradewaterfront.com/en/press/press-photos/
Belgrade’s €3.5bn Waterfront Project in 2021
https://www.belgradewaterfront.com/en/press/press-photos/
There are divergent claims about the nature of financialization.
Tendencies to regard financialization as primarily, or essentially, one particular thing:
as the increasing power of financial interests over politics,
as the growing dominance of financial logics or ‘shareholder value’,
as changes in the spatial organization of the global economy,
as the reconfiguration of society and the class system, or
as the mutation of culture and how we relate to ourselves.
Yet these are not mutually exclusive, and only together give the whole picture.
2019 Philip Mader, Daniel Mertens, Natascha van der Zwan, Handbook of Financialization: An Introduction
Author Main Definitions Main Level
of Financialization of Analysis
Robert Boyer process by which “all the elements of national demand bear the consequences of the Macro
(2000) dominance of finance”
Julie Froud et al. “a new form of competition which involves a change in orientation towards financial results Meso
(2000) but also a kind of speed up in management work”
Randy Martin “insinuates an orientation toward accounting and risk management into all domains of life” Micro
(2002)
Engelbert Stockhammer “increased activity of non-financial businesses on financial markets, […] measured by the Meso
(2004) corresponding income streams”
Greta Epstein “the increasing role of financial motives, financial markets, financial actors and financial Macro
(2005) institutions in the operation of the domestic and international economies”
Greta Krippner “a pattern of accumulation in which profits accrue primarily through financial channels rather Macro
(2005) than through trade and commodity production”
Julie Froud et al. “changes induced by the rhetoric of shareholder value [which] sets firms and households Meso-Micro
(2006) utopian objectives such as value creation by management intervention for giant firms or
security through stock-market saving for households”
Ke Tang and Wei Xiong “process […] through which commodity prices became more correlated with prices of financial Macro
(2010) assets and with each other”
Manuel Aalbers “capital switching from the primary, secondary or tertiary circuit to the quaternary circuit of Macro
(2008) capital […]; that is, the rise of financial markets not for the facilitation of other markets but for
the trade in money, credit, securities, etc.”
Özgür Orhangazi “designate[s] the changes that have taken place in the relationship between the non-financial Meso
(2008) corporate sector and financial markets”
Thomas Palley “(1) elevate the significance of the financial sector relative to the real sector, (2) transfer Macro
(2008) income from the real sector to the financial sector, and (3) increase income inequality and
contribute to wage stagnation”
2019 Philip Mader, Daniel Mertens, Natascha van der Zwan, Handbook of Financialization: An Introduction
Financialization of Cities: A New
Challenge for Cooperation and
Development Stakeholders.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
Since the 1980s, the financialization of real estate has remodeled urban governance,
placing it increasingly in the hands of investors. Cooperation and development
stakeholders should take a look at this risky practice.
It is often said that the form and socio-spatial organization of cities reflect the way in
which they are financed. In this sense, the 141% increase in the number of skyscrapers
since 2010 is revealing of a constantly growing phenomenon: that of the financialization
of city-making.
Through their built environment, cities are inexorably becoming a prime playing field
for financial capital. From 1991 to 2015, as Natacha Aveline-Dubach [CNRS Professor at
University Paris I Panthéon-Sorbonne, PhD in urban geography, expert in land and real
estate issues; political economy of urban production.] reminds us, financial investments
in real estate grew from around 1 billion to 430 billion USD.
While this phenomenon affects high-income countries above all, it also concerns the
large cities of intermediate-income countries such as Brazil and South Africa. It is
therefore essential for development stakeholders to understand not only the main
mechanisms of this financialization, but also the ways in which it transforms urban
governance and exacerbates urban crises.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
Private investors have long been major actors in city growth. But the period since the
1980s has been a milestone in urban production, as circulation of liquidities on
liberalized and globalized financial markets has continued to increase. Asset managers
(investment banks, pension funds, etc.) have started to take a keen interest in urban
land and real estate, to the same extent as bonds or shares issued by States and/or
companies.
Their goal: to maximize the profitability, tax reductions, and risk diversification for the
savings for which they are responsible. Financialization of cities thus refers to making
financial assets out of certain plots or buildings and —to a lesser extent— out of certain
infrastructure.
In many ways, financialization of residential real estate is that which most influences the
geography of urban development and the life of city dwellers. A first form of “elite-
based” financialization can be seen in the growing number of luxury towers in the
downtowns and waterfronts of big cities.
The financing rounds used for the construction of buildings and the purchase of
condominiums have both become much sought-after investment solutions for a rich
globalized elite.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
A second form of financialization is “mass-based,” when some of the rental stock is
purchased by financial players —for example in New York and Berlin by private equity
funds— and by the ever-increasing reliance of the middle class on the use of housing
loans to access homeownership.
Quite often, via a securitization transaction, the credit institutions transform these
housing loans into structured products sold on the financial markets.
In the last 15 years, these very mobile financial resources, which are constantly on the
lookout for good short-term yields, have been increasingly driving the making of cities
and metropolises in the Global South. This fact, associated with informal urbanization,
poses a certain number of challenges to development and international cooperation
stakeholders.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
The foremost impact of this convergence of the property and finance sectors can be
found on city governance. New private and public players are emerging and must now be
taken into account by the international cooperation stakeholders.
For example, investment banks that build luxury developments in the centers of big
cities, often via their specialized branches, are becoming significant players in city-
building. In addition, when these financial intermediaries come on the scene, they
drastically disrupt the economic model and the practices of the local real-estate
industries. Moreover, they transform ownership structures: from Bangalore to
Johannesburg, the local bourgeoisies and other historically dominant players such as
religious communities and local governments are increasingly giving up control of urban
land to investors who have no local roots.
At the same time, central banks are becoming ineluctable public players in the
financialization of property, and they are consequently playing a key role in the
organization of cities. This is the case in Beirut, where —for economic, financial, and
monetary stability reasons— the Central Bank of Lebanon has for the last fifteen years or
so massively organized and subsidized the development of housing loans for the middle
classes, thereby contributing to intensive urbanization that combines densification and
sprawl.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
The financialization of urban land and of real estate has at least two particularly harmful
consequences.
The first is the growth in the gap between housing supply and demand in terms of price,
standards, and tenure. Concretely, with this inflow of liquidities, the upsurge in land and
real-estate prices leads to disconnection between exchange value and use value of
property assets.
While investors benefit from the price increase, the local population has increasing
trouble in securing access to affordable housing.
Furthermore, financialization affects the formal channels of housing provision, as they
focus more and more on luxury properties and on bancarized homeownership, without
helping to house the many low-income families with no or limited access to mortgage
finance.
These days, with the withdrawal of public authorities from housing matters and the
constant spread of informal settlements, cities are faced with a growing scarcity in
formal construction of affordable housing.
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
A second and serious consequence of the financialization of cities has to do with their
heightened exposure to the risks of finance.
We can now see greater inter-independence between property and financial cycles
worldwide, during both bubble and crash periods. Real estate was, for example, at the
heart of the 1997 financial crisis in Southeast Asia and also played a nodal role in the
global financial crisis of 2008.
In times of crisis, the vulnerable urban populations are the foremost victims of this
entanglement between real estate and finance, and the first to lose their housing and
jobs and to find themselves over-indebted.
Thus, in both the Global North and South, financialization is a new factor of urban crisis,
and financial vulnerability is an issue that must be taken up by governments, local
communities, planning professionals, and stakeholders of development and
international cooperation. […]
2019 Bruno Marot, Financialization of Cities: A New Challenge for Cooperation and Development Stakeholders.
Financializing land and residential real estate. Remodeled urban governance. Exposure to the risks of finance.
https://ideas4development.org/en/financialization-cities/ MAR 12, 2019 Agence Française de Développement.
Responsible land governance
matters because it protects cities
from land-based corruption and can
solve and prevent conflicts and
social unrest, leading to much more
inclusive and sustainable cities.
Responsible land governance
matters because it protects cities
from land-based corruption and can
solve and prevent conflicts and
social unrest, leading to much more
inclusive and sustainable cities.
What is a financial instrument? Financial instruments
are assets, packages of capital that can be created,
traded, modified and settled.
Most types of financial instruments provide efficient
flow and transfer of capital all throughout the world's
investors. These assets can be cash, a contractual right
to deliver or receive cash or another type of financial
instrument, or evidence of one's ownership of an entity.
Financial instruments can be real or virtual documents,
and representing a legal agreement involving any kind
of monetary value. They may be divided into two types:
cash instruments and derivative instruments. Financial
instruments may also be divided according to an asset
class, which depends on whether they are debt-based or
equity-based. Equity-based financial instruments
represent ownership of an asset. Debt-based financial
instruments represent a loan made by an investor to the
owner of the asset.
https://www.investopedia.com/terms/f/financialinstru Fiat money is a currency (a medium of
ment.asp exchange) established as money.
The Association of Chartered Certified Accountants has
the following definition: “A financial instrument is any
Typically a country deals with:
contract that gives rise to a financial asset of one entity 3-8% Cash Money
and a financial liability or equity instrument of another 90-95% Credit Money
entity.”
Abdulaziz Al Ghannami, A Basic Understanding of Financial Instruments
https://medium.com/swlh/a-basic-understanding-of-financial-instruments-d51d8b141f6b
What is a share? It is a unit of ownership in a company.
As the share price fluctuates, so does the value of the
company.
What is a bond? It is a debt security. Borrowers issue
bonds to raise money from investors willing to lend
them money for a certain amount of time.
Forex is how individuals and businesses convert one
currency to another. It facilitates international trade
and investment.
What are commodities? They are physical assets. They
are raw materials mined, farmed or extracted from the
earth.
What is a derivative? It is a financial instrument whose
value depends on (derives its value from) the value of
(other more basic) its underlying asset. Derivatives are
a very important topic of interest in quantitative
finance.
Fiat money is a currency (a medium of
A stock index is a measurement of value of a certain exchange) established as money.
section of the stock market. Stock indices give traders
and investors an indication of how an exchange, region,
or sector is performing. How are indices traded? You
Typically a country deals with:
can’t. Because they are effectively just numbers- 3-8% Cash Money
averages. So in order to trade on the value of indices we 90-95% Credit Money
must choose a product that mirrors its performance.
Abdulaziz Al Ghannami, A Basic Understanding of Financial Instruments
https://medium.com/swlh/a-basic-understanding-of-financial-instruments-d51d8b141f6b
One Hyde Park
London
Rogers Stirk Harbour +
Partners in Knightsbridge,
London:
An 86-apartment luxury
development marketed as ‘the
most exclusive address in the
world’.
A one-bedroom flat here costs
£9 million. In 2013, only 19
were registered as being
occupied as a first home; 26 of
the flats were registered as
second homes meaning owners
benefited from a 50 per cent
reduction in council tax; 16
were empty; and the rest were
occupied by ‘companies’
Completed in 2011.
https://www.dezeen.com/2011/02/10/one-hyde-park-by-rogers-stirk-harbour-partners/
The project is targeted at the By coincidence, the surveyor
expat market, broadly known to
settle purchases in
released his report (urging
major cost cuts) on the same
London
cash, without a loan from the day as the estate agents
bank. Sales go quicker release their list of buyers:
that way.
An interesting collection of
The cheapest apartment in the über-wealthy Americans (many
project costs £11 million. with Dutch surnames); Russian
oligarch-billionaires and Arab oil
sheikhs.
The price of the most
expensive apartment remains
privileged information between Their combined fortunes
the buyer and the developer, represent about twice the size Reinier de Graaf
covered by a confidentiality of the British economy.
agreement.
‘Architecture is now
The ‘poorest’ of the prospective a tool of capital,
buyers is worth a little over £2 complicit in a
billion, about 50 times the
project’s construction budget. purpose antithetical
to its social mission’
To ensure that ‘finances will
add up’, the cost of the project Architectural
is subsequently cut by 40 per
cent. Review 2015
https://www.architectural-review.com/essays/architecture-is-now-a-tool-of-capital-complicit-in-a-purpose-
antithetical-to-its-social-mission
