A sudden rebound of real estate stock prices

Bank lending for real estate at a record high

As is well known, the next president of the United States has been chosen. While in both America and Japan, many had been expecting a victory for Clinton, the end result was a victory for Trump with the Japanese stock market seeing a temporary shock directly after. In terms of the market, this was similar to the "Brexit shock" six months ago.

If what Trump has advocated for the past couple of years (including his more inflammatory statements) is realised, the world would certainly see a period of great turmoil. However, after his meeting with current-president Obama, Trump seems to have become a completely different man from his image as a racist and misogynist. Being the "King of real estate", it seems unlikely Trump would act in any way that causes his own country's real estate market to drop, but for the next 4 years at least, the world’s highest ranked country in terms of GDP, America, will likely see its real estate market swayed.

Now we get to the real meat of the issue. Real estate prices have various factors that determine them such as demand, land price trends, and so on, but something that affects many of these factors is "Bank loans for real estate". Real estate companies buy land and build condominiums through bank loans, meaning variation in loan amounts clearly has an effect on condominium prices.

In fact, looking at the balance of distribution of condominium prices in the Tokyo area and real estate bank loans, condominium prices largely saw decreases since the mid 90s (loan balances having decreased), bottoming out in 2003 and then proceeding to rise. In the Lehman shock era of 2009, while condominium prices saw a temporary fall (loan balances remaining flat), both prices and loan balances began to rise again thereafter. According to the Bank of Japan's "Loans and Bills Discounted by Sector" index, bank loans for real estate continued to rise from mid 2012, reaching a record high at 65 trillion, 770.2 billion JPY in December of 2015. By June of 2016 this had increased further to 68 trillion 3,206 billion. On the other hand, overall bank lending increases are low compared to real estate loan increase rates, despite the BoJ's active monetary easing and promotion of corporate capital investment. In the 4 years of clear increase in real estate loans from June of 2012 to June of 2016, the growth of overall bank lending was 8.8% vs 13.8% for real estate focused loans (Calculated from the BoJ's "Loans and Bills Discounted by Sector" and "Principal Figures of Financial Institutions").

Long term interest rates remain negative, and as corporate capital investment remains sluggish, banks are making efforts to secure profitability. From mid-2015, bank loans for real estate have seen an acceleration in terms of amount increases, and seem likely to increase even further as a proportion of overall bank lending.

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