Bank Lending and Real Estate in Asia: Market Optimism and Asset Bubbles

• Main Authors: KOH, Winston T. H., MARIANO, Roberto S., PAVLOV, Andrey, PHANG, Sock-Yong, TAN, Augustine H. H., WACHTER, Susan M.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: Real estate bubble; Lender optimism; Disaster myopia; Asian financial crisis; Asian Studies; Finance; Real Estate
• Online Access: https://ink.library.smu.edu.sg/soe_research/446; https://ink.library.smu.edu.sg/context/soe_research/article/1445/viewcontent/BankLendingRealEstateAsia_2005.pdf
• Institution: Singapore Management University

This paper investigates the Asian real estate price run-up and collapse in the 1990s. We identify financial intermediaries’ underpricing of the put option imbedded in non-recourse mortgage loans as a potential cause for the observed price behavior. This underpricing is due to behavioral causes (lend...