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Residential and commercial real estate lending at commercial banks, 2004-2019 This figure shows aggregate dollar amounts of residential and commercial real estate (CRE) lending at commercial banks over time. Source–Board of Governors of the Federal Reserve System, H.8 Assets and Liabilities of Commercial Banks in the United States
Source publication
Commercial real estate (CRE) loan losses are a recurring contributor to bank failures and financial instability, yet they are not well understood. We examine a unique and proprietary data set of CRE loan defaults at banks that failed and were resolved by the FDIC after the 2008 financial crisis. We build upon an existing literature relating stochas...
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Citations
... Characterized by a long industrial chain, extensive correlation and great synthesis, real estate plays a basic and pioneering industrial role in the national economy. Real estate is a high-investment and high-risk industry with long construction cycles, poor realizability and high uncertainty, which makes it a key area for economic development decisions and risk management [1,2]. Therefore, it is of great practical value and theoretical significance ...
(1) Background: China is beginning to see increasingly complex real estate development dynamics as urbanization, industrialization and globalization advance. As a key driver of economic and social development in China’s cities, real estate has created prosperity while facing the risk of capitalization and a “hard landing”, making it increasingly difficult to bring it under control. (2) Methods: a new approach that integrates “evolution dynamics–driving mechanism–policy design” is constructed based on the Boston Consulting Group matrix, exploratory spatial data analysis, GIS and Geodetector, and this paper empirically studies the dynamics and driving mechanism of real estate development based on the case study of small county-level cities in Gansu, China. (3) Results: Firstly, real estate development in Gansu is characterized by significant spatial differentiation, heterogeneity and autocorrelation, and its distribution pattern comes into being from unsynchronized macroeconomic, population, social, industrial, institutional and policy development interweaved with the real estate control. Secondly, the real estate is diversified in spatiotemporal evolution models, and the cold and hot cities of different models are in quite different geographical patterns with high spatial agglomeration. Thirdly, there are many driving factors affecting the distribution patterns in real estate. These factors are in complex relationships and they are classified into three categories of “Scale–Contribution–Comprehensive”-oriented driving factor and three sub-categories of “Key–Important–Auxiliary” factors. Fourthly, the factors show large differences in the interaction effects, with the real estate industry scale influencing factors being dominated by bifactor enhancement and the economic contribution influencing factors being dominated by non-linear enhancement. Notably, factors such as permanent resident population, urbanization and government revenue have a strong direct influence on the industry scale and economic contribution of real estate, and factors such as expenditure, output value of industry, urbanization rate and number of secondary schools all have a strong interactive influence. (4) Conclusions: The cities are divided into four policy areas of comprehensive development, contribution improvement, scale growth and free decision. Furthermore, differentiated and adaptive measures are proposed for each zoning, which significantly improves the accuracy and synergy of urban real estate management.
... , Deng et al. (2000), Noordewier et al. (2001), Archer et al. (2002), Feldman and Gross (2005), Kelly (2008), Goodman and Smith (2010), Elul et al. (2010), Goodman and Smith (2010), Kau et al. (2011), Quercia et al. (2011), Archer and Smith (2013), Park and Bang (2014), Campbell and Cocco (2015), Jones and Sirmans (2015), Tian et al. (2016), Badarinza et al. (2018), Laufer (2018), Gupta (2019), Cloyne et al. (2019), Defusco et al. (2020), Adzis et al. (2020), Agarwal et al. (2020), de Haan and Mastrogiacomo (2020),Ross and Shibut (2020),Linn and Lyons (2020),Ganong and Noel (2020),Nakatani (2020). ...
Purpose
The purpose of this paper is to examine the drivers of default in the Malaysian housing market in the light of various policy interventions by the country’s central bank, and the government’s expressed concern to ensure balanced growth in the market. This paper assesses the importance of considering the endogeneity of loan-to-value (LTV) in predicting housing loan default and its implications.
Design/methodology/approach
In this paper, the author addresses the endogeneity problem in the LTV variable using two instrumental variables (IV) in this probit regression: national residential property gains tax and the statutory reserve ratio of Bank Negara Malaysia. This study uses the instrumental variable probit model to consider endogeneity bias. This study assumes a latent (unobservable) variable ( Y *), representing a borrower’s tendency to default, which is associated linearly with the borrower’s and loan characteristics and other variables ( Xi ). This study uses individual borrower-level information of 43,156 housing loan borrowers from the files of a well-established housing bank in Malaysia.
Findings
This study’s results confirm that endogeneity causes a substantial difference in the magnitude of the estimated effects of LTV on the default tendency. At the lower values of LTV, the probability of default is over-estimated, and at the higher values, the default probability is substantially underestimated. Endogeneity bias also affects the estimated coefficients of loan and borrower characteristics. The authors find that the interest rate is less relevant in predicting loan default. Other loan characteristics, such as loan age, tenure, payment amount and the built-up area, are relevant. This study’s result confirms that the borrower’s location matters, and an increase in state gross domestic product per capita and an increase in the supply of residential units reduce default probability.
Research limitations/implications
The present study did not explore the applicability of the “equity theory of default” in the Malaysian housing market. This study did not assess “strategic default” issues and the effect of borrowers’ characteristics, personality traits and self-control of Malaysian housing loan borrowers in the mortgage decision-making process. The evolving dynamics of the Malaysian housing market microstructure in property valuation remained unexplored in the present study.
Practical implications
The findings have crucial relevance in the decision-making process of commercial banks, the central bank and the government to frame policies to foster balanced growth and development in the housing market. The authors argue that striking a subtle balance between the concerns of financial stability and productive risk-taking by commercial banks in Malaysia remains a continuing challenge for the country’s central bank. The authors also argue that designing suitable taxation policies by the government can deliver its cherished goal of balanced development in the housing market.
Originality/value
Empirical research on the Malaysian housing market based on micro-level data is scarce due to a paucity of relevant data. This study is based on the individual borrower-level information of 43,156 housing loan borrowers from the files of a well-established housing bank in Malaysia. In this analysis, the authors find clear evidence of endogeneity in LTV and argue that any attempts to decipher the default drivers of housing loans without addressing the issue of endogeneity may lead to faulty interpretation. Therefore, this study is unique in recognizing endogeneity and has gone deeper in identifying the default drivers in the Malaysian housing market not addressed by earlier papers.
... The Regulation (EU) 575/2013 (CRR) (2013) art 402 (2) (d) also distinguishes between commercial immovable properties under construction and fully constructed. Johnston Ross and Shibut (2020) refer to a specific feature of CREL that is essential when segregating the property types into income-producing property and construction and development. They point out that the underlying CRE has not only the function to secure the loan. ...
... The dimension property quality refers to specific quality metrics of CRE that might belong to the building substance, the tenant base, as well as the micro location of the property. In order to attract tenants, property owners have to increase their capital expenditures in the property or make rent concessions (Johnston Ross and Shibut, 2020). The OCC Handbook (2013) outlines three classifications of office buildings, varying from class A (high-quality) to class C (functional), depending on the quality of used construction material and quality of design and fixtures and their status of maintenance. ...
... Usually, the CREL is not completely paid off at maturity which requires a careful assessment of the property value to ensure loan exposure coverage at the end of the loan term (Bardzik, 2019). Johnston Ross and Shibut (2020) find that only 20% of the loan proceeds were repaid at maturity in their sample data of FDIC loans. This may have resulted from the sample date having included shorter-term bank loans. ...
This study investigates the impact of agricultural financing and agricultural output growth on employment generation in Nigeria from 1981 to 2017. The study adopts the framework of the Auto Regressive Distributed Lag (ARDL) Model for analysis. The empirical results show that while agricultural financing increases employment generation in both the short run and long run, the lag of agricultural output growth increases employment generation mainly in the short run. Other variables found to have significant effect on employment generation were price and agricultural output while labor force population, wages and aggregate expenditure were insignificant. The study concludes that policy makers should endeavor to see that every fund allocated for a specific agricultural schemes and interventions should be fully utilized for its purpose. To increase employment opportunities, there should be careful monitoring of the implementation of each scheme and policy to realize their specific objectives.
... The Regulation (EU) 575/2013 (CRR) (2013) art 402 (2) (d) also distinguishes between commercial immovable properties under construction and fully constructed. Johnston Ross and Shibut (2020) refer to a specific feature of CREL that is essential when segregating the property types into income-producing property and construction and development. They point out that the underlying CRE has not only the function to secure the loan. ...
... The dimension property quality refers to specific quality metrics of CRE that might belong to the building substance, the tenant base, as well as the micro location of the property. In order to attract tenants, property owners have to increase their capital expenditures in the property or make rent concessions (Johnston Ross and Shibut, 2020). The OCC Handbook (2013) outlines three classifications of office buildings, varying from class A (high-quality) to class C (functional), depending on the quality of used construction material and quality of design and fixtures and their status of maintenance. ...
... Usually, the CREL is not completely paid off at maturity which requires a careful assessment of the property value to ensure loan exposure coverage at the end of the loan term (Bardzik, 2019). Johnston Ross and Shibut (2020) find that only 20% of the loan proceeds were repaid at maturity in their sample data of FDIC loans. This may have resulted from the sample date having included shorter-term bank loans. ...
Purpose
This study aims to establish the relationship between house acquisitions by foreigners (HAF) and house price index (HPI) in Turkey.
Design/methodology/approach
Due to the nature of this study, the data spans from January 2020 to March 2022. The house price index and the number of foreign house acquisitions across three provinces: Ankara, Izmir and Bursa, and national-level data were obtained from the TurkStat database. Consumer price index (CPI) and Turkish interest rates are control variables. In addition, monthly Turkish interest rates and CPI were obtained from the investing.com and TurkStat database, respectively. Furthermore, this study used autoregressive-distributed lag and Toda Yamamoto Granger causality models to avoid analysis bias. HPI and HAF are the variables used to accomplish the objectives of this study.
Findings
This study established a short-run equilibrium between foreign house acquisitions at the provincial and national levels. The short-run deviations were adjusted faster, ranging from 57.53% to 89.24% for some provinces, while Izmir is struggling to adjust at 6.48%. Both unidirectional and bidirectional Granger causality evidence suggests that the Turkish house price index increases at the national and provincial levels. This finding suggests the need for continuous policy intervention in the Turkish housing market because house prices play a pivotal role in Turkish economic development and daily lives.
Research limitations/implications
This study’s scope and single-country study are its limitations. However, those limitations make the findings appropriate for the country of the study rather than generalising the results.
Practical implications
The study provides empirical evidence that foreign housing acquisition contributes negatively to housing affordability in Turkey and calls for authority intervention. This is because housing is considered shelter, a fundamental need to which citizens are expected to be entitled. Most citizens are low- and medium-income earners who may be unable to afford a house out of their income if it becomes costly. Once the expenditure to secure housing exceeds 30% of their income, it is considered unaffordable.
Originality/value
To the authors' best knowledge, this is the first empirical study that established the influence of foreign house acquisitions on Turkish house price increases and adversely reduced house affordability by Turkish citizens. The study is the first on foreign Turkish housing acquisition that used both theory of ownership and justice motivation theory to explain HAF.
