The Transition in Housing Finance: In Central Europe and Russia: 1989 - 1999

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Date Published 1999
Primary Author Douglas B. Diamond
Other Authors


This analysis is based on interview and other data collected in June 1998 and updated in mid-1999 as part of a study sponsored by USAID through the Urban Institute. It reflects solely the knowledge, understanding and views of the author, and has not been reviewed by any country authorities or by USAID. This report describes and analyzes the past and near-term prospects for housing finance in Russia and four Central European countries (the Czech Republic, Hungary, Poland, and Slovakia). The focus is on the policies, institutions, and forces shaping the market today, but the starting points and transition process are also covered. Three major conclusions are drawn. First, all four Central European countries have adopted similar institutional structures for their new housing finance systems. Second, homebuyers in Central Europe are so far unusually reluctant to borrow, even at subsidized low real rates, unless rates are below the return on bank deposits. However, mortgage market in Poland seems to be growing at an accelerating pace. Third, the Bausparkassen-type institutions, which have been very popular, may supplant mortgage or commercial banks as the primary housing lenders in all countries other than Poland, even though they will not provide the sorts of public benefits expected. With respect to Russia, the housing finance sector has made greater progress towards market-based operation than the economy as a whole. Partially due to continuing USAID-funded technical assistance, the sector is poised to develop rapidly whenever macroeconomic conditions grow more supportive of long-term lending.

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