The crisis of housing-finance schemes in Hungary in the 1990s

Description

In the highly developed economies housing investments are financed by loans to the extent of 60-80%. However, in Hungary housing loans nearly disappeared in the 1990s, and they were replaced predominantly by household’s savings. This study focuses on the determining factors of the crisis of housing-finance in Hungary. According to the authors the crisis situation can be explained mainly by factors on the demand side. Due to macroeconomic changes real income of households decreased in the 1990s, and demand for new housing also fell. The paper gives evidence about the relevance of the macroeconomic environment on the housing market of Hungary.

Conclusions

In the course of analysis, in addition to the deteriorating income position of households two factors were determined by the authors that seemed to have strong influence on the development of housing market in Hungary in the 1990s. Namely, the general loss of value of real-estate stock and the high real rate of interest on loans. The combined negative impacts of these two factors could not be counterbalanced by the newly introduced housing finance-schemes. The analysis comes to the conclusion that the possible solution for the crisis can be the improvements of macroeconomic conditions.

Contact info

Városkutatás Kft. Budapest
Mr József Hegedüs

Publication date

1/1/1999

Researcher

Mr József Hegedüs – Mrs Éva Várhegyi

Document type

research