South Eastern Europeans want to invest in their homes
- Primary objective of households in SEE is investment in their homes
- Growth in the mortgage segment is forecasted to reach 24 % yearly in 2007 – 2009
Dubrovnik/ Vienna – The region of South Eastern Europe continues to deliver strong growth well above EU level. 2007 will be another year of fast growth for this region, with an expected GDP increase of 5.9%. Growth continues to be supported by lively consumption and investment activity. "The strong consumption is driven by households´ wish to reach the same living standards of their richer Western European neighbours", says Debora Revoltella, CEE Chief Economist of the UniCredit Group at the Euromoney Conference in Dubrovnik.
Strong growth above 5%/6% is anticipated in Bulgaria and Romania this year and in 2008, with both countries still profiting from the positive EU accession. Growth is expected to reach its peak in Croatia this year, topping at 5.5%, and to remain robust in 2008 despite some slow-down triggered by recently introduced measures relating to credit growth.
Strong domestic demand and a favourable external environment are behind driving the dynamic performance in both Serbia and Bosnia and Herzegovina. In both countries, however, sustainability of growth in the medium term is conditional on advancement of progress in structural reforms. In Bosnia and Herzegovina, political forces have so far continued to fail to reach the necessary consensus, while in Serbia forthcoming local and presidential elections are likely to delay further actions.
In the SEE region, the households remain an important driver of growth. Households are rapidly adapting their consumption habits to new and improved standards of living. "Consumption is marked by fast income growth and improved access to the credit market. This is also supported by a wealth effect arising from fast growth of house prices", says Debora Revoltella. The private consumption grows extraordinary in the SEE countries stimulated by still low endowment of durable goods. Only roughly 30% of the South Eastern Europeans possess a computer and just under 40% own a car.
At the same time, households are increasingly inclined towards real estate investment; there is a strong demand for dwellings financed by mortgages. Households are actually continuing to save, but they are also gradually redirecting their saving capacity to invest in their house. In Bulgaria and more recently in Croatia, the emergence of new savings flows is adding to the accumulation of wealth (financial and real).
Given households' attitude, the residential housing market continues to offer good opportunities. Home ownership is well above the CEE average, but there is still high potential for future growth in the market, especially related to quality improvements. Strong demand for housing in the context of still constrained supply is driving a significant increase in house prices. In most SEE countries still persists some underevaluation of prices of houses compared to their theoretical level, except for Croatia.
Overall, developments in the residential property market in SEE suggest a high potential for the mortgage market in the region. “We will have 24% growth per year in 2007 – 2009 in the mortgage segment”, so says Debora Revoltella, CEE Chief Economist of the Economic Research Department.
About the UniCredit Group
With a current market capitalization of approximately €84 billion (1 October 2007), ranking among the top financial groups in Europe, UniCredit has a presence in 23 countries, with over 40 million clients and 9,000 branches, approximately 170,000 employees and total assets of approximately €1,018 billion (pro forma) as at 30 June 2007.
Through the merger with Capitalia, effective as of 1 October 2007, UniCredit has significantly strengthened its presence in Italy, which is one of its core markets alongside Germany, Austria and CEE.
In the CEE region, UniCredit operates the largest international banking network with over 3,700 branches and outlets, where more than 76,000 employees serve approximately 27 million customers.
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