Mortgage Boom Defies Expectations
Mortgage Boom Defies Expectations
It might seem surprising that the mortgage lending market in Kyrgyzstan is booming amid continuing worries about the country's political stability. Economists say the reason for the upward trend is that lenders are able to charge high interest rates, while housing remains in great demand.
The Kyrgyz government has made housing a strategic priority, and pledged to support mortgage lending as a way of allowing people to buy homes. Prime Minister Felix Kulov said as much in April in a speech to parliament. But he also noted that most people’s income levels mean a mortgage is beyond their means.
Some economists would argue that the mortgage market cannot develop unless there is underlying stability. “Without stability, an investor will not risk investing in new building construction via a mortgage loan,” Jyldyz Sarybaeva told NBCentralAsia. “Banks will also be risk-averse and will be reluctant to bring down interest rates – essential to the mortgage business.”
Sarybaeva doubts that interest rates will fall until investors gain confidence in the country’s long-term stability.
Yet despite such concerns, the number of new mortgage loans shot up in the first half of 2006. Adamjan Joldoshev, who heads the government agency responsible for real estate registration, has announced that over 27,700 loans were handed out in January-June 2006 compared with 14,500 in the same period last year.
Several new banks have launched mortgage deals in recent months, offering longer repayment periods than before – seven to ten years instead of three to five. One result has been to push up real estate prices in the capital Bishkek, property analysts say.
According to one of NBCentralAsia’s economic analysts, the mortgage boom has little to do with confidence that political conditions are stable. Instead, the fact that it is still possible to charge high rates of interest makes the political risk acceptable.
Another factor driving the trend is the sheer lack of housing – much of Kyrgyzstan’s housing stock is old, and not enough new homes are being built to satisfy the rising demand.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
The Kyrgyz government has made housing a strategic priority, and pledged to support mortgage lending as a way of allowing people to buy homes. Prime Minister Felix Kulov said as much in April in a speech to parliament. But he also noted that most people’s income levels mean a mortgage is beyond their means.
Some economists would argue that the mortgage market cannot develop unless there is underlying stability. “Without stability, an investor will not risk investing in new building construction via a mortgage loan,” Jyldyz Sarybaeva told NBCentralAsia. “Banks will also be risk-averse and will be reluctant to bring down interest rates – essential to the mortgage business.”
Sarybaeva doubts that interest rates will fall until investors gain confidence in the country’s long-term stability.
Yet despite such concerns, the number of new mortgage loans shot up in the first half of 2006. Adamjan Joldoshev, who heads the government agency responsible for real estate registration, has announced that over 27,700 loans were handed out in January-June 2006 compared with 14,500 in the same period last year.
Several new banks have launched mortgage deals in recent months, offering longer repayment periods than before – seven to ten years instead of three to five. One result has been to push up real estate prices in the capital Bishkek, property analysts say.
According to one of NBCentralAsia’s economic analysts, the mortgage boom has little to do with confidence that political conditions are stable. Instead, the fact that it is still possible to charge high rates of interest makes the political risk acceptable.
Another factor driving the trend is the sheer lack of housing – much of Kyrgyzstan’s housing stock is old, and not enough new homes are being built to satisfy the rising demand.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
