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Financial Infrastructure and House Prices

Author

Listed:
  • Mandell, Svante

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Wilhelmsson, Mats

    (Centre for Banking and Finance)

Abstract

We argue that banks operating in a local market possess better information about the local housing market than do non-local banks. Possessing this information may influence their willingness to grant loans to house buyers and the specifics of the loan terms, which in turn may affect house prices because credit facilitation makes the housing market more efficient. Using a panel data set covering a period from 1993 to 2007 and involving 274 municipalities in Sweden, we establish a positive causal influence of local bank presence on local house prices. There are significant spatial and spillover effects – that is, banks in a municipality affect the housing markets in neighboring municipalities, although to a lesser extent than in their own municipality. Similar results are obtained through a gravity model. The results are robust over time and municipality size.

Suggested Citation

  • Mandell, Svante & Wilhelmsson, Mats, 2013. "Financial Infrastructure and House Prices," Working Paper Series 13/7, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2013_007
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    References listed on IDEAS

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    Cited by:

    1. Doerr, Sebastian, 2018. "Collateral, Reallocation, and Aggregate Productivity: Evidence from the U.S. Housing Boom," MPRA Paper 106163, University Library of Munich, Germany.
    2. Hong, Yun & Li, Yi, 2020. "Housing prices and investor sentiment dynamics: Evidence from China using a wavelet approach," Finance Research Letters, Elsevier, vol. 35(C).

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    More about this item

    Keywords

    House prices; lending; financial infrastructure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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