Empirical Research On The Relationship Between Housing Price And NPL Ratio Of Commercial Banks

With the development of the real estate industry in China in recent years and itscontribution to China’s overall national economy gradually increase，its dominantposition in our national gradually strengthened. The real estate industry with longindustrial chain, long investment cycle, many affiliated companies, less equity capitaland subject to national policy implications of volatile characteristics, forming a closecontact with banks and other financial institutions. Housing prices continued to rise,as well as livelihood issues related to China, has caused the national emphasis on thehigh prices. Japan and the U.S. financial crisis as a warning, the asset price bubblewill trigger a financial crisis. Countries have begun to formulate macroeconomicpolicy to regulate the real estate market, and the intensity gradually increased, thedecline in housing prices has become an inevitable trend.However, the decline in housing prices affect the real estate industry’sprofitability, repayment ability, thus affecting the non-performing loans ofcommercial banks, and even affect the quality of the national economy. Research therelationship between housing prices and non-performing loan ratio of commercialbanks. Housing prices are reasonable or not is related to livelihood issues, making thedevelopment of housing prices has been cause for great concern. The main content isas follows:Part I: Background and significance of the writing of the article. Introduce realestate growth and development as well as the financial support from commercialbanks and other financial institutions. The current real estate market has entered aboom phase, along with the high housing prices continued to cause widespreadconcern of the people and society, and the countries from the asset price is too high,the bubble burst and risk prevention point of view of the real estate market conducteda series of regulation in order to avoid risks. Part II: Review of the literature on housing prices and bad loan ratio ofcommercial banks of domestic and foreign. Analysis of research done by scholars inhousing prices and NPL ratio, combined with China’s national conditions,macroeconomic conditions, the current market expectations for the real estateindustry to analyze a link between housing prices and NPL ratio.Part III: The transmission channels between housing prices and non-performingloans of commercial banks. Through the data to illustrate real estate market dominantposition in the national economy, to introduce an objective fact that housing pricesrise, the impact of housing price movements of the real estate industry itself as well asnon-performing loan ratio of commercial banks. And in accordance with the behaviorof the three main real estate loans as the different transmission channels, analysis theimpact of the decline in housing prices of non-performing loan ratio.Part IV: selected quarterly data for2004-2011, housing prices is a greater impactfactors on real estate, and non-performing loan ratio is able to represent the qualityfactors of commercial bank assets. Finally, the empirical results to analyze therelationship between housing prices and the rate of bad loans. Conclusions: Thecontinued rise in house prices has aroused widespread concern，including thegovernment work report repeatedly referred to the housing problems. There is Surveyshowed that nearly70%of economists believe that prices downlink is an inevitabletrend. The empirical analysis of housing prices and the non-performing loan rateshows that they have a negative correlation relationship. That is the decline inhousing prices will lead to non-performing loan rate rise. First, the decline in housingprices to reduce the income of real estate development enterprises, the repaymentability decline and originated bad loans. Second, there is A long production line of thereal estate industry，the real estate downturn will affect the level of profitability ofthe real estate-related industry, and thus affect the repayment of related industriesdecreased ability to bring commercial banks ’bad loan ratio increased. Last, on theone hand, decline in housing prices, make real estate depreciation of collateral in thecommercial banks of property buyers, on the other hand, may cause the alreadybuyers abandoned for mortgage. so non-performing loan ratio of commercial banks will rise. The decline in housing prices will affect the non-performing loan ratio ofcommercial banks from multiple channels.Therefore, the state in the formulation of real estate policies should achievereasonable prices reunification of housing price, while maintaining the stability of thefinancial system.