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The Crisis in Housing Financing in Hungary in the 1990s

Author

Listed:
  • József Hegedüs

    (Metropolitan Research Institute, Lónyay u. 34, H-1093 Budapest, Hungary)

  • Éva Várhegyi

    (Financial Research Ltd, Felhévizi u. 24, H-1023 Budapest, Hungary, evarh@freemail.c3.hu)

Abstract

In the 1990s, housing finance reached a crisis point in the transforming housing sector. Loans practically disappeared as a resource for housing investments for households and were replaced by savings. Paradoxically, while the institutions of the market economy, including a competitive banking system, have been created in Hungary, in the housing finance sector, the Hungarian economy has become different from those of developed economies where 60-80 per cent of housing investments are financed from loans. By examining the processes impacting the supply and demand sides, this paper attempts to find the causes of the housing finance crisis. Besides the worsening income situation of households, two other factors have played a major role in the crisis: the decrease in the value of property and the high real interest rates of loans. The combined effect of the two factors cannot be offset by the housing subsidy system. Our conclusion is that overcoming the crisis is primarily a matter of macroeconomic changes.

Suggested Citation

  • József Hegedüs & Éva Várhegyi, 2000. "The Crisis in Housing Financing in Hungary in the 1990s," Urban Studies, Urban Studies Journal Limited, vol. 37(9), pages 1619-1641, August.
    • Handle: RePEc:sae:urbstu:v:37:y:2000:i:9:p:1619-1641
    DOI: 10.1080/00420980050085469
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    References listed on IDEAS

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    1. Buckley, Robert M., 1989. "Housing finance in developing countries : a transaction cost approach," Policy Research Working Paper Series 347, The World Bank.
    2. JoAzsef Hegedüs & Iván Tosics & Stephen K. Mayo, 1996. "Transition Of The Housing Sector In The East Central European Countries," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 8(2), pages 101-136, July.
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