Mortgages, developers and property prices

Michael Chui, Anamaria Illes and Christian Upper

BIS Quarterly Review, 2018

Abstract: This special feature studies the risks posed by the rapid rise in property developer debt in several Asian economies in recent years. Gradually, the firms involved are shifting away from traditional bank loans and choosing to issue debt securities, often in foreign currency. So far indebtedness has tended to be low for most firms, but weak profitability and declining interest coverage ratios give cause for concern. The firms are thus vulnerable to shocks, such as increases in interest rates, falling property prices or local currency depreciations. Even if outright defaults can be avoided, the weakening fundamentals of the sector could spill over to other parts of the economy through lower house prices.

JEL-codes: E40 F20 F30 F34 F41 F65 L85 (search for similar items in EconPapers)
Date: 2018
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