The objective of this paper is three-fold: 1) investigate current conditions of housing and housing finance markets in transition economies; 2) assess their market potential compared to one another and to the advanced EU countries (EU15 countries); and 3) provide some thoughts for policy makers and for entrepreneurs based on lessons from this research.

Because of the lack of comprehensive statistics on housing finance, much of the necessary data was collected from a market survey and questionnaire specially elaborated to assess the performance of housing finance markets and systems in study countries. The survey data were supplemented by the most recently available published statistics.

Housing finance markets in transition economies are still in an early stage of development, not to mention mortgage lending (house used as collateral). However, there are some favourable signs in these markets. This chapter analyses the housing finance markets in terms of the primary (lending and secondary (funding) markets, referring to direct mortgage lending and mortgage-backed funding.

Well-organised regulatory and supervisory frameworks are indispensable if countries are to gain the maximum benefits from housing finance markets. Due to the complexity of mortgage-related products, establishing accepted standards of regulations for the overall mortgage market is crucial for vitalising the housing finance markets in the region.

To sum up, foregoing analyses are translated into the following spider charts of housing and housing finance markets in study countries, where the score “2” in each category refers to the EU level as a benchmark.

This final chapter touches upon mortgage default insurance. Mortgage insurance will be a key product as an innovative instrument to reallocate risks, which would be expected to expand the mortgage finance market and further the development of securitisation.

The population of Poland has been on a slightly upward trend since the transition period and reached the level of 38.19 million in 2003 as compared to 37.88 million in 1988 (an increase of 306 thousand – 0.8%).

The Hungarian policymakers are fully aware of the net gains that the single currency can bring to the Hungarian economy, and therefore support the adoption of the euro. At present, the government, based on the convergence program submitted in December 2004, considers 2010 as a feasible target date for euro adoption.

Current Czech macroeconomic developments can be characterized as favourable. A rise in economic growth dynamics can be observed (to 4.1% in the second quarter of 2004 in year-on-year terms), driven by a higher investment activity and, recently, also by a leap in the economy’s export performance.

The Gross Domestic Product development continued to gradually accelerate with the Slovak economy’s efficiency, albeit with minimal modifications on its supply side. The basic branch structure of the Gross Domestic Product formation has not substantially changed in comparison with the previous year, although a long-term development tendency of market services strengthening at the expense of industry has remained on the same level. On the side of use the acceleration of economic growth was a result of an increased domestic demand.

As it was presented in the Memorandum of Economic Policies of the Government and Bank of Lithuania for the period July 1, 2001-December 31, 2002, during the past eighteen months, Lithuania has made significant progress in restoring macroeconomic stability, following severe disruptions in 1998-99 in the wake of the Russian financial crisis.

Reforms accomplished in Latvia and integration in the European Union have left a positive impact on economic development of the country. In the period from 1996 till 2003 Latvian gross domestic product (GDP) has grown on average by 6.1% annually. Among the other European countries only Ireland had higher growth rates in the same period of time.

Estonia has enjoyed five consecutive years of economic growth. Supported by improving demand for Estonian export and continuously strong domestic demand the real GDP growth accelerated from 5.2% in 2003 to an estimated 6% in 2004.

The revision of national accounts resulted in a minor change of the GDP estimate for 2002 and a first release of the 2003 figure. After the last SORS’ release of the revised annual national accounts estimate since 2000 (in September 2004), the estimate of economic growth for 2002 was 0.1 p.p. below the earlier estimate (3.3% instead of 3.4%), while estimates for 2000 and 2001 remained unchanged (3.9% and 2.7%, respectively).

The Republic of Croatia is a sovereign, independent republic, established as a parliamentary democracy since 1991. Its governing structure is based on a principle of the distribution of power among the legislative authority (the Croatian parliament), executive authority (Government of the Republic of Croatia) and judiciary (municipal courts, country courts, commercial courts, the High Commercial Court, the Administrative Court and the Supreme Court).

Economic re-launching started in 2000 has continued at a sustained rhythm based on domestic demand acceleration. In 2001–2004, Romania registered an effective and relevant correlation between the strong economic growth, on one hand, and disinflation and maintaining internal and external deficits in sustainable limits, on the other hand.

Providing with housing in Ukraine is inadequate. One third of Ukrainians live in unsatisfactory conditions i.e. have less than 9 m2 of the floor area per person. Around two million households or six millions individual are registered on waiting lists for improving housing conditions. On average, a Ukrainian resides on 20 m2 which is two to three times as little as in developed countries.

The development of Kazakhstan housing attitudes began in 1991 after the acceptance of legislations on privatization and property. Later, acts were accepted for a pledge of investment activity, the new Civil code, the decrees of the President of the Republic of Kazakhstan validated laws on the mortgage of real estate and the state registration of the rights to real estate and its transactions. These fell under the laws of the Republic of Kazakhstan on housing attitudes.

The Workshop on Housing Finance in Transition Economies was held at the OECD headquarters on 14-15 December 2004, which was organised by the Outreach Unit for Financial Sector Reform, Directorate for Financial and Enterprise Affairs of the OECD, under the aegis of the Committee on Financial Market and the Centre for Co-operation with Non-Members programs, with sponsorship from the Government of Japan.