East European Regional   

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Housing Sector Assistance Project   

important aspect of the macroeconomy; macroeconomic stability is crucial for the housing

sector to thrive, and, in turn, a growing and responsive housing sector is important for an

economy to realize its growth potential.  The reverse is also true: a poorly functioning

housing sector will inevitably constrain growth.

1

  Thus, the Ministry of Finance and the

National Bank of Poland must be able to understand and predict movements in the

housing sector as well as the consequences of changes in inflation and real interest rates.

Estimates of long term demand relationships, and their variance according to

household characteristics, should also be useful to the Housing and Urban Development

Authority (HUDA) for developing housing subsidy policies that best achieve its desired

policy ends. The Polish Banks Association (PBA) and many individual banks have a

vested interest in forecasting and/or marketing.  Our comments should be useful to in order

to help assess what types of databases and methodologies are relevant to forecasting the

potential demand for mortgage credit.  Finally, many other representatives of the private

sector (the construction and building trades industries, household goods producers, real

estate brokers, etc.) could benefit greatly from better forecasts of housing activity and the

availability and desirability of housing finance.      

In summary, the ability to estimate the demand for housing and mortgage credit is

important with regard to (1) setting national economic policy; (2) predicting the growth of

GDP; (3) determining which types of housing subsidies demand or supply subsidies,

assistance to rental or owner occupied housing best promote both Poland's social goals

and economic efficiency; and (4) helping the private sector banks, the construction

industry, real estate brokers, appraisers, and so forth plan for, and market, their services.

The main assumptions underlying the development of this study are the following:

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A better understanding of both the demand for housing and the demand for

mortgage credit are important.  The demand for mortgage credit obviously

derives from the demand for housing; thus, our analytical framework begins

there.  However, the demand for mortgage credit is an important variable in its

own right that is, some of its determinants are independent of housing per se.

We discuss both macroeconomic and microeconomic housing demand models:

macroeconomic models are based on estimates of national aggregate data,

while microeconomic models use household level information to understand the

household decisions that underlie demand.

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The demand for housing rests in a complex series of interrelated decisions

taken by households in response to both economic and financial factors and

1

See the discussion in Sally Merrill, Patric Hendershott, Stephen Mayo, and Douglas Diamond in

 Housing and the Macroeconomy: Tax Reform and Alternative Subsidy Policies for Housing,  April 1999.