The Effect of Housing Prices on Bank Performance in Korea

Ok, Youngkyung; Kim, Jungmu; Park, Yuen Jung

doi:10.3390/su11226242

Cited by 3 publications

(2 citation statements)

References 46 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Specifically, it was found that the likelihood of a crisis increases remarkably when bubble-like behaviour in house prices is accompanied by high household leverages (Wan, 2018). However, there are situations where housing prices were found to correlate negatively with NPLs, whereas property prices increase, the same goes to the quality of banking assets, leading to the reduction of NPLs (Ok et al , 2019; Liu et al , 2013).…”

Section: Review Of Literaturementioning

confidence: 99%

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Tham¹,

Said²,

Adnan³

2021

IJHMA

View full text Add to dashboard Cite

Purpose The study on how macroeconomic factors affect non-performing loans (NPLs) have not been focussed on property loans, which had been amongst the largest contributor of NPLs in many countries. At the same time, whilst there are many studies that focusses on NPLs during the recession and financial crises, not many studies focus on how macroeconomic factors affect property NPLs in a recovering economic environment. The purpose of this study seeks to fill the gap by analysing the relationships between gross domestic product (GDP), interest rates, income, foreign direct investments (FDI), housing prices and taxes on property NPLs with Malaysia as a case study in which NPLs rose for the first time after declining for almost a decade since the 2008–2009 global financial crisis. This study aims to understand the dynamics and direction of causation in relationships. Design/methodology/approach The author uses the auto regressive distribution lag analysis between the independent variables of GDP, interest rates, housing prices, service taxes, percapita income and FDI affecting the dependent variable of property NPLs from 2009 to 2017, during a unique period of recovering economic environment where NPLs rose for the first time in almost a decade of decline. Findings This study found that interest rates, housing prices, income, GDP and service taxes were found to possess long cause effects and long run elasticity with NPLs. At the same time, interest rates were found to implicate property NPLs significantly in longer periods, followed by GDP, housing prices, service taxes and income. FDIs were found to be insignificantly negative in implicating property NPLs in the long run. Research limitations/implications This paper allows policymakers to understand the dynamic implications of crucial macroeconomic factors in affecting NPLs so that appropriate strategic monetary policies could be formulated towards addressing them. More focus shall be given to addressing the long term implications of these factors on NPLs. Practical implications Appropriate strategic monetary policy making can be channelled towards addressing these factors via understanding the short and long term implications of macroeconomic variables on property NPLs. Policymakers can take note of the long cause effects and long run elasticity of average interest rates, housing prices, income levels, GDP and service taxes with property NPLs so that appropriate long term policies can be addressed to control the rise of property NPLs in the country. At the same time, priority should be given towards strengthening of the GDP of the country due to its strongest impact in long term effects with reduction of NPLs in the country. Social implications The insights from the present study suggest policymakers interested in bringing stability in the real estate finance system need to account for the various macroeconomic variables found in this study. Originality/value The paper is novel on at least two dimensions. First, this study involves focussing on a unique period of recovering economic environment where NPLs rose for the first time after a decade of decline since recovering from the 2008–2009 global financial crisis. At the same time, this study focusses on property NPLs, which is unique in nature compared to general NPLs. This study had enabled policymakers to better understand the dynamic implications of several macroeconomic variables affecting property NPLs and assist them in strategic monetary policy making.

show abstract

Section: Review Of Literaturementioning

confidence: 99%

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Tham¹,

Said²,

Adnan³

2021

IJHMA

View full text Add to dashboard Cite

show abstract

“…Cloyne et al (2017) argue that the impact of housing prices on bank loans in the UK is significant. Ok et al (2019) argue that if housing prices in Korea rise, banks increase their lending and improve their soundness. Unlike these studies, however, some studies show that changes in housing prices have no or negative effects on baning performance.…”

Section: Introductionmentioning

confidence: 99%

Are The Effect of Housing Prices on Bank Performance Different Among Korean Commercial, Regional and Specialized Banks?

Heonyong

2022

Studies in Business and Economics

View full text Add to dashboard Cite

This study analyzes the effect of housing prices on banking performance in Korea. The findings of the study reveal that the impact of housing price changes on banking performance was different in the commercial banks, regional banks and specialized banks. This seems to be due to the different characteristics of each bank. The three types of banks in Korea have different functions, and thus the impact of changes in housing prices on their respective banking performance is different. Therefore, it would be desirable for Korea’s financial regulatory authorities to draw up policies and perform its supervisory functions in consideration of these points.

show abstract

The short- and long-run relationship between house prices and bank credit in developed and emerging market economies: A comparative study

Dawood

2024

Panoeconomicus

View full text Add to dashboard Cite

This study compares the short- and long-term relationships between house prices and bank credit in developed and Emerging Market Economies. This fact is an essential issue because most financing is facilitated by bank credit. Using quarterly data from 22 developed and six Emerging Market Economies and the panel autoregressive distributed lag model method, this study found that real house prices are the prominent factor of bank credit. Moreover, the magnitude of house prices and gross domestic product relationship with domestic bank credit is considerably greater in Emerging Market Economies than in developed nations. Meanwhile, the foreign interest rate on bank credit is nearly four times greater in Emerging Market Economies. Further, the exchange rate-credit relationship is positive for developed countries, whereas negative for Emerging Market Economies. Therefore, authorities maintaining financial stability must pay close attention to real house price dynamics. Moreover, Emerging Market Economies must also consider the exchange rate and foreign interest rates in managing credit growth.

show abstract

The Effect of Housing Prices on Bank Performance in Korea

Cited by 3 publications

References 46 publications

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Are The Effect of Housing Prices on Bank Performance Different Among Korean Commercial, Regional and Specialized Banks?

The short- and long-run relationship between house prices and bank credit in developed and emerging market economies: A comparative study

Contact Info

Product

Resources

About