The Feasibility of Estimating the Demand

for Residential Mortgage Credit in Poland

27

housing, and the  speed of adjustment  between the stock desired by households and the

actual stock.  Thus, modeling of the aggregate relationship requires time series data on

the stock of dwellings, determinants of  desired demand  for housing stock, and

determinants of the  speed of adjustment  of actual to desired demand.  The  desired 

demand for housing is generally determined from the relationship between the market

value of the housing stock, the price of housing, household income, and various household

characteristics.

The problem is that in transition economies, given the distortions and constrained

supply responses associated with previous interventionist policies, the (econometrically)

estimated parameters of the  desired  stock function will not accurately describe what

demand will look like in the near future under a new regime of market determined

decisions.

24

The types of barriers noted above between potential and effective demand affect

the speed of adjustment toward  desired demand.   Indeed, these barriers are theoretically

important determinants of the failure to translate potential into effective demand.  Within

the transition economies, one striking factor associated with slow adjustment toward

 desired demand  may be low residential mobility rates.

25

  Consequently, studies focusing

on determinants of residential mobility would appear to have great utility in understanding

barriers to effective demand.

In transition economies at the current time,  potential demand  may be better

analyzed by examining relationships between the size of the housing stock for 

market

economies

 and the determinants of demand included in these equations.  It might, for

example, be assumed that once market forces are more fully unleashed in a transitional

economy such as Poland's, the housing sector will be increasingly pulled in directions that

replicate the sectoral performance of other market economies.  Countries such as Turkey,

Chile, and Malaysia, for example, with relatively similar income levels to Poland's, had

1.20, 0.99, and 1.03 households per dwelling in 1990, compared with a figure of about

1.09 for urban Poland in 1990.  International comparisons can establish  norms  of such

outcomes in relation to the determinants in the equation.   Expected  levels of housing

stock in relation to households and other variables can be established based on estimates

of demand equations using cross country data.  Estimates of the  desired demand  for

Poland, so obtained, can be interpreted directly, as  potential demand ; alternatively, they

24

The estimated parameters will be biased; the all important income and price elasticities will not be

adequate for future policy planning.  Thus, while the equation may be of use for forecasting in the very short term,

it will not provide adequate information for planning for the long term.

25

In 1990 annual rates of residential mobility in Warsaw were estimated to be 2.6 percent.  Within 18 cities

studied in the Housing Indicators Project with highly restrictive policy frameworks, annual mobility averaged only

5 percent, while among 18 cities with  enabling  policy frameworks, mobility averaged 10 percent four times as

high as that in Warsaw.