THE FEASIBILITY OF ESTIMATING THE DEMAND FOR

RESIDENTIAL MORTGAGE CREDIT IN POLAND

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EXECUTIVE SUMMARY: THE OBJECTIVES OF THIS STUDY AND THE KEY

RECOMMENDATIONS

As Poland's economy continues its strong growth, and its housing and housing

finance sectors mature and expand, questions regarding the magnitude of the current and

potential demand for housing and mortgage credit are increasingly heard.  Observation

of construction projects alone suggests that some segments of demand are making

themselves felt in the market; also, data on housing starts suggest that the sector is more

robust than data on housing completions might imply.  The expanding portfolio of

residential mortgage loans and the increased number of lenders are also testimony to the

transformation of the housing finance sector.

This paper provides a brief commentary on a very large, and generally very

technical, topic: methodologies and models for estimating the demand for housing and the

related demand for mortgage credit.  We have made no attempt to actually estimate any

model of the demand for credit or the demand for housing.  In the first instance, the

requisite data are not available.  Rather, the purpose of this paper is to provide a

discussion of the types of housing models that are generally developed, the practical

applications of these models, and the types of data necessary for their estimation.

It would be useful to have two types of estimates of demand: (1) an estimate of the

demand for housing; and, (2) related to this, an estimate of the demand for residential

credit.  In addition, for each of these estimates there is both a macroeconomic and a

microeconomic construct.  On the one hand, an estimate of aggregate demand nation wide

is a function, primarily, of overall macroeconomic factors.  Similarly,  the aggregate

demand for residential credit is a related macroeconomic concept. 

On the other hand, from a microeconomic perspective, household decision making

with regard to consumer goods and housing is also of interest.  Topics to address include:

(a) the determinants of the demand for housing (and for cars and other consumer goods)

of individual households; (b) the probability that a household with given characteristics

would seek to obtain mortgage credit; and (c) if the household does apply for credit, what

factors determine the amount requested?  Corollary functions are (d) whether the

application is accepted; (e) if yes, how much credit is offered; and (f) what is the potential

for credit risk: the probability of late payment and/or default.

The study has been prepared based on a request from a number of quarters,

including the Ministry of Finance (MOF) and the Foundation for Mortgage Credit; hopefully,

it will be useful to their efforts to understand the factors underlying the demand for housing

and the demand for mortgage credit, and the relationship among these and the other asset

and consumer goods choices facing Polish households.  Housing is an extremely