In: Root » Legal and finance » Loans and mortgages
Slovenia Following a nationwide referendum held in March 2003, Slovenia became a member of the European Union (EU) on 1 May 2004. Improving competitiveness and economic growth, reforming public administration, and enhancing labour market flexibility are the main challenges for the government. With the highest GDP per capita among the Central & Eastern European (CEE) countries, Slovenia is an advanced transition country. After 15 years of independence and achieving solid economic growth and declining inflation, Slovenia took a further step by adopting the euro in January 2007. The growth of real GDP from 4.4% in 2004 to nearly 4% in 2005 followed by preliminary figures for the first half of 2006 suggest an estimated growth of at 5.1% in the first and at 4.9% in the second quarter of 2006. Exports, investment and domestic consumption were the main drivers of this growth. The development of Slovenia's new legal system has been comparable to that of other CEE countries. The first law on Public Private Partnership was passed by the parliament in September 2006. The reform of the former Yugoslavian legal system by Slovenian government was a precondition for achieving major improvements in the country's economy. Improved economic environment coupled with the establishment of a market-oriented economy and stable democratic institutions have provided Slovenia with European Union (EU) accession in 2004. Privatization process The Housing Act, adopted in 1991, laid down a legal basis for the abolition of socially owned property, in which the privatization process of existing housing was carried out within 2 years (1991-1993). After privatization the ratio between owner-occupied and rented housing reached 88%, while the same ratio prior to the privatization was 67%. Privatization of social housing in 1991 was the first of its kind to take place in Slovenia. Mortgage loan system in Slovenia The housing finance system in Slovenia was subject to dramatic changes due to the transition of the country's economy from socialist to a private market economy structure. The decision on replacing the 'providing' approach by 'enabling' was also a turning point in the housing policy of Slovenia. The changes have resulted in a total withdrawal of the state from the system of housing finance in the first half of the 1990s. The emergence of the National Housing Fund was due to the absence of a well-defined housing policy and as a response to slowly developing system of mortgage financing. Slovenia's mortgage credit system, in comparison to other European countries, is relatively undeveloped. The banks are using mortgage as collateral when crediting the corporate sector. However, housing finance mortgages have also been increasingly used, but their importance in this sector is still very modest. The amount of US $945 million of mortgage loan was outstanding in 1999, which represents a level of nearly 4.7% of GDP. The banks with 95% of all mortgage loans outstanding are the dominant lenders. The insurance companies, with a small share of 5%, occupy the second place. Mortgage loans constitute around 8% of total banks assets while mortgage loans account for around 15% of all bank credits. The individuals share of mortgage loans was only 5% compared to almost 95% of all banks mortgage loans allocated to the corporate sector. Data regarding mortgage loans maturity reveals that approximately 77% of total mortgage loans outstanding, of original maturity of up to 5 years are relatively short. The maturity of mortgage loans to individuals, which are basically housing loans, is longer.
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