Financial Infrastructure and House Prices

Svante Mandell and Mats Wilhelmsson

No 13/7, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & 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.

Keywords: House prices; lending; financial infrastructure (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013-03-29
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Financial infrastructure and house prices (2015)
Working Paper: Financial infrastructure and house prices (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:kthrec:2013_007

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