Purpose This study aims to examine how the dynamics of housing prices and population aging jointly affect banks’ real estate industry loan risk in China. This study focuses on whether population aging affects the association between housing price changes and the credit risk of banks’ real estate industry loans. Design/methodology/approach This paper uses the panel data of 49 commercial banks in China from 2011 to 2020 covering about 69% of total financial assets. It adopts the individual fixed-effects model with bank-clustered standard errors. The study ensures the robustness of the conclusion by using the natural logarithm of housing prices, rebasing the housing price index to 2015, replacing the aging indicator and conducting heterogeneity analysis. Findings The empirical results show that housing price changes are negatively associated with banks’ real estate industry non-performing loan (NPL) ratios. However, population aging plays a significant positive moderating role between the two. The marginal effects of housing price changes are weak at lower aging levels, but become positive and statistically significant around the median and upper quartiles of the aging distribution. This mechanism is particularly prominent in the non-eastern region and non-state-owned banks. Originality/value This study not only reveals the aspect of population aging as a risk amplifier but also documents its dual role: population aging is associated with a lower baseline level of banks’ real estate industry NPL ratios, yet it strengthens the risk response to housing price changes at higher aging levels, providing key evidence for macro-prudential supervision and differentiated credit policies in an aging society.
Wang et al. (Tue,) studied this question.