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Financial Infrastructure and House Prices

  • Mandell, Svante

    ()

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

  • Wilhelmsson, Mats

    ()

    (Centre for Banking and Finance)

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.

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Paper provided by Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), Royal Institute of Technology in its series Working Paper Series with number 13/7.

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Length: 25 pages
Date of creation: 29 Mar 2013
Date of revision:
Handle: RePEc:hhs:kthrec:2013_007
Contact details of provider: Postal: Department of Real Estate and Construction Management, Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden
Web page: http://www.kth.se/en/abe/inst/fob

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  1. Sophocles N. Brissimis & Thomas Vlassopoulos, 2007. "The Interaction between Mortgage Financing and Housing Prices in Greece," Working Papers 58, Bank of Greece.
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  16. Gerlach, Stefan & Peng, Wensheng, 2004. "Bank Lending and Property Prices in Hong Kong," CEPR Discussion Papers 4797, C.E.P.R. Discussion Papers.
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