Banking System, Real Estate Markets, and Nonperforming Loans

Wen-Chieh Wu (), Chin-Oh Chang () and Zekiye Selvili ()
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Wen-Chieh Wu: Department of Public Finance, National Chengchi University, Taipei, Taiwan, http://www.nccu.edu.tw/english/main.php
Chin-Oh Chang: Department of Land Economics, National Chengchi University, Taipei, Taiwan, http://www.nccu.edu.tw/english/main.php
Zekiye Selvili: Department of Finance, California State University Fullerton, Fullerton, CA.,USA, http://www.fullerton.edu/finance

International Real Estate Review, 2003, vol. 6, issue 1, 43-62

Abstract: This paper examines the link between nonperforming loans, real estate prices, and the banking system. We found that the level of nonperforming loans affects bank profitability as well as the price performance of real estate markets. We also analyzed the factors that cause the ratio of nonperforming loans to total loans to fluctuate. We observed that a higher ratio of corporateloans to individual loans results in a lower percentage of nonperforming loans. In contrast, a lower real estate lending rate relative to the primary lending rate leads to a higher percentage of nonperforming loans. These results suggest that the percentage of nonperforming loans can be partially governed by the lending practices of banks.

Keywords: Nonperforming Loans; Real Estate; Banking System (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2003
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