Mortgages, Developers and Property Prices
15 Pages Posted: 13 Mar 2018
Date Written: March 11, 2018
This special feature studies the risks posed by the rapid rise in property developer debt in several Asian economies in recent years. Gradually, the firms involved are shifting away from traditional bank loans and choosing to issue debt securities, often in foreign currency. So far indebtedness has tended to be low for most firms, but weak profitability and declining interest coverage ratios give cause for concern. The firms are thus vulnerable to shocks, such as increases in interest rates, falling property prices or local currency depreciations. Even if outright defaults can be avoided, the weakening fundamentals of the sector could spill over to other parts of the economy through lower house prices.
JEL Classification: E40, F20, F30, F34, F41, F65, L85
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