The structure of housing finance markets and house prices in Asia - BIS Quarterly Review, part 5, December 2006

Over the past decade, Asia-Pacific economies have made significant progress in developing private housing markets and market-based systems for financing home purchases. However, development has been uneven across countries due to the heterogeneity in market infrastructure and economic development. This special feature documents structural characteristics of national housing markets in Asia, focusing on the private housing sector, and investigates their potential impact on house price dynamics. The study covers six economies in the region: China, Hong Kong SAR, Indonesia, South Korea (hereinafter Korea), Singapore and Thailand. Since the 1997 Asian financial crisis, Asian governments have stepped up their efforts to improve the structure of the housing finance system. In the primary market, the share of private housing has increased substantially. In addition, commercial banks and other private financial institutions have gained importance in mortgage loan origination, and more diversified mortgage products have become available to households. In the secondary market, mechanisms for mortgage-backed securitisation have been established in most Asian economies, although the market is still not fully developed. As pointed out in previous work, different arrangements in housing finance systems can have important implications for the linkages between house prices and macroeconomic factors (Tsatsaronis and Zhu (2004)). Whereas the previous study mainly focused on industrialised economies, this article provides complementary insights for emerging market economies.