This year, demand for mortgage loans for young people may increase significantly. From January 1, the indicator of the indirect cost of residential construction, which was determined by the Ministry of Construction, Architecture and Housing and Communal Services at the level of UAH 2,717 per 1 sq. m, began to be applied. Previously, a square meter in the government officials' presentation cost UAH 2,063.
Closer to life
An increase in the average cost of residential construction may greatly increase demand for loans for residential construction. This is what Ukrainian bankers and officials of the State Fund for the Promotion of Youth Housing Construction say. Thus, the Ministry of Construction published a statement saying that after the change in the indirect cost of residential construction, the average price of a square meter increased by 30% in all regions of the country. This means that for many young families the process of buying an apartment will be significantly facilitated – now they will need to pay much less to construction organizations. The thing is that the Fund for the Promotion of Youth Lending provides preferential loans at the price per square meter approved by the Ministry of Construction. That is, the higher the official cost of a square meter, the larger the loan amount the borrower receives. Thus, the popularity of "youth loans" should grow.
More expensive, but more accessible
This, in particular, is the opinion of the banks that cooperate with the Youth Fund. "The increase in the average price will significantly increase demand for preferential loans and, at the same time, increase banks' earnings," believes Irena Kilchytska, deputy chairman of the board of Pravex-Bank. Yuriy Blashchuk, chairman of the board of the International Mortgage Bank, agrees with her. He welcomes the increase in the indirect cost of housing, but believes that social programs in the field of mortgages in Ukraine are still "poorly developed."
Despite the fact that the scheme of cooperation between banks and the Youth Fund is quite complex (the client comes to the bank, takes a loan to buy an apartment, and the state fund pays part of the interest for them) and requires significant additional expenses, the popularity of such loans is greater than that of direct state loans. Thus, if about 600 of the latter were issued last year, then bank loans with partial state compensation were almost 12 times more (about 8 thousand). This is explained, first of all, by their greater accessibility. "The fund's new programs make access to state loans more difficult," explains Irena Kilchytska. The head of the Youth Fund himself, Valeriy Omelchuk, says that by a special resolution of the Cabinet of Ministers only certain preferential categories – large families, athletes and young scientists – have the right to a state loan, while access to bank loans is not limited by anything.
The reverse side of the loan
At the same time, Valeriy Omelchuk admits that the increase in the indirect cost of residential construction may also have some negative consequences. The thing is that the financing of the Fund's programs this year has been increased only slightly: from UAH 139 million in 2005 to the planned UAH 160 million this year. The need to pay more to each borrower means that for other applicants for the loan this opportunity decreases. "UAH 160 million is not the figure that can influence the market," agrees Serhiy Vovkiv, president of the mortgage company "BTA-Ipoteka Ukraine." He recalls that, according to the Ukrainian National Mortgage Association (UNIA), the volume of Ukraine's mortgage lending market is about $1.7 billion. According to the expert, the state's social policy in the field of mortgage lending still has no effect on anything: "Mortgage loans are accessible to families with above-average incomes, and banks assess the borrower's solvency without taking subsidies into account," says Serhiy Vovkiv.
Printed in the newspaper "DELO" No. 53 of January 11, 2006