Towards The Estimation Of The Attraction Of European Residential Mortgage Markets: A Methodological Approach

The European household borrowing has been growing significantly for some years, mainly stimulated by the residential mortgage demand. This phenomenon has persuaded many European banks to consider strategically the possibility to seize the development opportunities of this business also on some not domestic mortgage markets. The main theory about the productive asset landscape location shows that the different attraction degree, or the different ability in attracting new businesses, is driven by a number of territorial, social and economic factors and by their specific combination. Starting from this point, the paper tests the assumption that the size and perspectives of any residential mortgage market is a function of a set of variables strictly correlated to its two fundamental dimensions: total outstanding and gross new credit. It is well-known in literature that a generic indirect relation exists between the residential mortgage market trend and the tendency of some specific macroeconomic variables (such as interest rates, financial markets and so on) and that residential mortgage markets are directly driven by specific ìvalue driversî. The analysis stresses the fact that also construction and overall building conditions represent a sensitive variable to forecast residential mortgage market tendencies. By working out an environmental analysis, this paper aims at defining a viable methodology to estimate the attraction degree of residential mortgage markets calculating an attraction composite index (RMMA index); the latter could supply se nsitive information useful to guide the strategic decision of a bank considering the option of enter in a non domestic residential mortgage market.