Minister predicts CZK 20-30bn drop in mortgages

21. 10. 2008 11:00
Home buyers will borrow CZK 110-120bn this year, down from CZK 142bn in 2007

Prague - The total value of mortgage contracts signed this year will be CZK 20-30 billion lower than last year, according to Jiří Čunek, minister for regional development.

"We expect that the volume of new mortgages provided to individuals will amount to CZK 110-120 billion," Čunek said in an interview for Aktuálně.cz.

Last year Czech mortgage providers lent CZK 142 billion crowns, which was a significant increase from just over CZK 100 billion in 2006. In the first half of this year the volume dropped to less than CZK 60 billion.

Česká spořitelna (ČS) has seen probably the largest drop on the domestic mortgage market. The bank has reported its new mortgages have shrunk to approximately one-half of last year's volumes.

Analysts say that the sharp decline in ČS's mortgage business is not primarily a result of the global financial crisis, but owes to the bank's recent decision to terminate contracts with external resellers.

Other banks, speaking off record, say their mortgage businesses have seen a moderate decline or remained flat.

The minister's prediction reflects a cooling demand for home ownership in the Czech Republic. Developers say in September the demand was 30 percent lower than a year earlier.

Dušan Kunovský, chief executive at housing developer Central Group, confirmed the trend in a recent interview for Aktuálně.cz.

While banks are trying to offset the declining demand for mortgages by waiving fees or offering other discounts, some developers are getting rid of less profitable housing projects.


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