East European Regional   

14

Housing Sector Assistance Project   

Thus, the following questions are relevant:

!

Has the demand for housing lagged behind the significant growth in GDP during

the last half of this decade?

!

Is this level of demand for mortgage credit what would be expected at this time?

!

What determinants distinguish the demand for housing and the demand for

mortgage credit?

!

Are consumers' energies and funds being concentrated on consumer

durables or on some other items?

These questions are very difficult to answer for Poland (and perhaps for other

transition countries), not only because there are insufficient data for analysis but also

because it is not clear what should be expected in the transition process.  Is demand low

as compared with which countries? At what point in time in the evolution of their mortgage

finance sectors?  What would be expected as the system finalizes its emergence from

central controls and price distortions?  At least one analyst has suggested that mortgage

credit utilization is unduly low not only in Poland but also in Hungary, the Czech Republic,

and Slovakia.

12

  There are, in fact, a large number of plausible reasons for constraints to

exist on the demand for housing and credit, and these are discussed below.

#

Estimating Demand for Housing and Mortgage Credit in Poland: Potential

Versus Effective Demand.

  For many reasons, the levels of demand for housing and for

mortgage credit evidenced in the United States and in Western Europe may hold little

relevance for Poland and other transition countries, at least at the current time.  In the first

instance, of course, differences in income level, in real interest rates, in the relative price

of housing and other goods, and in the ratio of the price of housing to income are all

determining factors.  But making a hypothetical assumption for the moment let us say,

assuming a group of households with similar incomes and preferences are there other

factors that might distinguish differences in level of demand?

We suggest that a variety of barriers produce a gap between potential demand and

effective demand.

13

  Furthermore, the variables that impact the demand for housing may

12

See Doug Diamond,  The Transition in Housing Finance in Central Europe,  Chapter 6: Conclusions,

forthcoming, 1999.

13

Please also refer to annex I.  Formally, the issue can be expressed as the rate at which the actual

housing stock moves toward the desired level of housing stock, which can be more or less rapid and a function of

a variety of factors.