The Feasibility of Estimating the Demand

for Residential Mortgage Credit in Poland

3

their own preferences, as determined by a multitude of socioeconomic variables.

The demand for mortgage credit is one end result of (as well as being a factor

in) at least the following: (a) the decision to own or rent; (b) the decision to

move; (c) the decisions regarding portfolio choice that is, what role, if any,

housing assets will play in the household's accumulation of wealth; and (d) the

demand for specific features of unit and locational quality as well as an overall

level of housing services. (That these various decisions are not independent is

one reason why model estimation can become so complex from a statistical and

econometric point of view.)

!

Transition countries represent a unique economic paradigm.  Housing demand

relationships modeled for the United States and Western Europe are not

adequately helpful; thus, while database design and the methodologies of model

development can certainly be  imported  to Poland, the estimated parameters

of models from these other countries cannot be.  Furthermore, the gap between

 potential demand  and  effective demand  is likely to be quite large in transition

countries in the short term and definitely larger than the gap in markets with

well developed institutions for financing and constructing housing and

infrastructure.

  For these reasons, it is difficult to tell whether, at the present

time, the demand for mortgage credit as evidenced by the outstanding

mortgage portfolio of Poland's lenders is smaller or larger than might be

expected.

2

!

Finally, we have made an attempt to discuss, in (reasonably) nontechnical

terminology, complex economic models and complex econometric estimation

methodologies.  The databases underlying the various types of estimations also

receive attention. The more highly technical material is largely contained in the

report's annexes, which are directed at economists, statisticians, and data and

survey experts.

As discussed in the Housing Finance Assessment Report and elsewhere, numerous

barriers based on both supply and demand factors to land and housing development

exist in transition countries that make it difficult to translate  potential demand  into

 effective demand. 

3

  One of these barriers has been the availability of residential

mortgage credit.  In the past several years, however, the market for residential credit has

grown and a large number of banks now offer mortgage credit.  In addition, establishment

of both mortgage banks and a second contract savings scheme will be expected to

increase mortgage lending.

2

We refer only to the portfolio developed since about 1995 on market based terms.

3

Refer to  Building on Progress: The Future of Housing Finance in Poland.