Scandinavian Working Papers in Economics

Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

No 2013:7: Financial infrastructure and house prices

Svante Mandell () and Mats Wilhelmsson ()
Additional contact information
Svante Mandell: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Mats Wilhelmsson: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

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

JEL-codes: H31

25 pages, June 18, 2013

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CTS2013-7.pdf PDF-file

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