The importance of property markets for monetary policy and financial stability - BIS Papers No 21, part 3, April 2005

The real estate sector has been a major source of strength for the global economy since the most recent economic downturn. This has been particularly true of the residential property sector: in most countries house prices have been quite strong over the past few years. Rising house prices, together with low interest rates, have boosted mortgage refinancing activities, encouraged consumer spending and supported macroeconomic performance. By contrast, real commercial property prices in most economies have remained well below their peak levels reached in the late 1980s and the early 1990s. Despite this, delinquency rates for commercial real estate loans have been much lower than their historical averages. As a result, banks’ loan portfolios have remained in reasonably good shape overall and the share of non-performing loans has been relatively low (BIS (2003a)).