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House prices and bank loan portfolios in an emerging market: The role of bank ownership

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  • Ayberk, İdil
  • Önder, Zeynep

Abstract

Evidence from developed markets suggests that banks increase their mortgage loans with house price appreciation, but the findings for commercial and consumer loans are mixed. How do banks change their loan allocation with the appreciation of house prices in an emerging market? Do state-owned banks behave differently? We answer these questions using province-level data from Turkey over 2007Q4–2015Q2 and unavailable land share and mortgage rate as instruments for house price growth. We find that banks substitute away from commercial and industrial loans to mortgage, consumer, and construction loans as house prices appreciate. In addition, state-owned banks misallocate their loans by reducing their commercial and agricultural lending more than private banks. Our results imply that the policymakers should consider the adverse effects of house price appreciation due to the crowding-out of commercial loans, especially by state-owned banks.

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  • Ayberk, İdil & Önder, Zeynep, 2022. "House prices and bank loan portfolios in an emerging market: The role of bank ownership," Economic Modelling, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:ecmode:v:106:y:2022:i:c:s0264999321002728
    DOI: 10.1016/j.econmod.2021.105683
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    2. Achsanta, Aldy Fariz & Lepetit, Laetitia & Tarazi, Amine, 2022. "Government ownership of banks: Implications for minority shareholders," Economic Modelling, Elsevier, vol. 112(C).

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    More about this item

    Keywords

    House price; Bank credits; Crowding-out; State-owned banks; Emerging markets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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