In: Root » Legal and finance » Loans and mortgages
Housing Finance and Mortgage Markets in The Czech Republic, Hungary, Poland, Slovakia and Slovenia There has been a substantial growth in mortgage lending over the past decade in Europe. The rate of mortgage loans outstanding in the EU doubled in nominal terms over the period 1988 to 1998. By end of 1998 this amounted to around EUR3 trillion, which represents 33% of GDP. National characteristics and economic importance of the Mortgage markets are distinct in different countries. Germany, the UK, France and the Netherlands are the largest markets in terms of volume outstanding. The markets with the fastest growth during the period 1988 to 1998 were Portugal, Spain, Ireland and the Netherlands. There has been an intense competition in mortgage markets across Europe creating greater affordability of housing and favourable conditions for high demand for mortgage loans. The present housing situations of Europe's households are founded on their future affordability to pay back the loan, an ability which may or may not be realized. Indeed, although the evidence is uneven in strength and coverage, there are indications that the failure to meet loan repayments is widespread among European homebuyers. On the contrary, the mortgage and loans market in Central and East European countries was almost absent prior to the political and economic reforms of 1989. However, economic reform was not new to socialist Mortgage Markets. economies even prior to the communist collapse of 1989. In fact, the post-war history of these countries has been marked by successive attempts at reviving the economy and rectifying the stagnation and decline in growth that gradually set in after the switch to central planning. Housing construction cost, access to low cost leased land, cheap and/or free land were some forms of subsidies for housing development and infrastructure during the socialist era of these countries. The post-war dynamic growth of industry in Central European countries brought about intensive rural to urban migration. The population growth in cities and demographic characteristics' change both created a demand for housing that far exceeded the designated plans for housing. The acute housing shortages in urban areas prevailed as housing construction could not keep pace with increasing demand, causing housing deficits to grow in absolute numbers. These developments called for a market-oriented housing system that was consistent with the economic reforms. Planners asserted that economic liberalization had to be considered if the housing situation in these countries was to achieve any further significant improvement. This meant that housing finance sector remained the central point of attention and continued to play an important role in the process of economic liberalization. The focus of the chapter, therefore, is to discuss the issues of the housing finance sector in five Central European countries: the Czech Republic, Hungary, Poland, Slovakia and Slovenia. These countries have been classified as the 'advanced reformers' by Renaud. Accordingly, the Czech Republic and Slovenia are often considered to be leading members of this first group in terms of speed and quality of change.
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