TY - UNPB T1 - Financial Integration and Spatial Linkages in Housing Markets Y1 - 2014 A1 - Milcheva, Stanimira A1 - Bing Zhu AB -

This study investigates whether an increase in cross-border bank lending can lead to spillover effects among housing markets of developed countries using a dynamic spatial panel model. Variations in house prices in one country can spill over house prices in other countries by transmitting counterparty risks through a foreign-bank lending channel. Foreign banks intermediate wholesale bank funding and can affect domestic credit supply and asset prices by transmitting financial conditions across borders. Cross-border bank flows transmit financial risks such as currency, maturity, credit and funding risks which may be associated with a change in either global financial conditions or country-specific factors. While controlling for country-level and global risk factors, we find stronger co-movement among house prices between countries with stronger financial integration. Our findings have implications for international portfolio diversification based merely on geographic factors. While other studies find that economic integration drives cross-country correlations in property returns, we show that the fact that the major global institutional markets are highly linked through the financial markets also can lead to increased inter-linkages with hosing markets and a reduction in the attractiveness of real estate in a mixed-asset context.

JA - 21st Annual European Real Estate Society Conference T3 - ERES: Conference CY - Bucharest, Romania UR - http://library.eres.org/cgi-bin/rsa98.pl?conf=ERES2014&type=session&theme=O &slot=2750 U3 - RePEc:arz:wpaper:eres2014_133 J1 - Conference 2014 ID - oai-eres.id-eres2014_133 M3 - 10.15396/eres2014_133 ER -