the Housing Indicators Program suggests that at an equilibrium value of 

R

^

/y

(housing payments relative to income) in market economies with incomes similar

to Poland would be about 0.25.  Values for such countries are: Turkey, 0.25; Chile,

0.28; Malaysia, 0.26.

With a fixed loan to value ratio = 0.25

l

, 

M*

 =

 lV*

a lV

(

<

ky

r

(17)

V

&

M

D

<

F

(18)

The second constraint is on household liquid assets (

F

) relative to down payment

requirements:

V

&

M

D

<

F

(19)

If housing were supplied at a level to put each household in equilibrium, and a fixed loan 

to value ratio 

l 

is assumed, the equilibrium condition would be:

F

> (1

&

l

)

V

(

(20)

Eq. (20) might not be satisfied even if suppliers put forward

 V

* for each y, since a

constant payment ratio is not consistent with housing demand functions; that is, to the

extent that equilibrium spending differs from the payment rule (especially if the equilibrium

payment is greater).  In addition, the stock of housing offered for sale might be different

from equilibrium 

V*

s.  If the actual distribution of 

V

s is on average well above 

V*

s for most

of the population, Eq. (20) will not be satisfied.  Similarly, if this is true, many households

will not have adequate financial assets to purchase more expensive housing than their

equilibrium level.

I 15