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Banking System, Real Estate Markets, and Nonperforming Loans

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Abstract

This paper examines the link between nonperforming loans, real estate prices, and the banking system. We found that the level of nonperforming loans affects bank profitability as well as the price performance of real estate markets. We also analyzed the factors that cause the ratio of nonperforming loans to total loans to fluctuate. We observed that a higher ratio of corporateloans to individual loans results in a lower percentage of nonperforming loans. In contrast, a lower real estate lending rate relative to the primary lending rate leads to a higher percentage of nonperforming loans. These results suggest that the percentage of nonperforming loans can be partially governed by the lending practices of banks.

Suggested Citation

  • Wen-Chieh Wu & Chin-Oh Chang & Zekiye Selvili, 2003. "Banking System, Real Estate Markets, and Nonperforming Loans," International Real Estate Review, Global Social Science Institute, vol. 6(1), pages 43-62.
    • Handle: RePEc:ire:issued:v:06:n:01:2003:p:43_62
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    Cited by:

    1. Andrés Sagner, 2009. "Determinantes del Precio de Viviendas en Chile," Working Papers Central Bank of Chile 549, Central Bank of Chile.

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    More about this item

    Keywords

    Nonperforming Loans; Real Estate; Banking System;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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