Economic Policies on April 16–30, 2011

Mortgage market

It is likely on the rise…

The building (homing) market has mainly entered an uncertain area in the latest period. Despite a relative rise achieved by this sector since the beginning of this year, as for real estate agencies, this evolution is rather due to the fact that many dwelling buildings which were being constructed since 3–4 years, a period when the building industry accomplished a boom but further faced a grave crisis in 2009 and 2010, are now being finished. Too little people run now the risk of investing in home building. According to statistics, there are about 90 building companies in Chisinau municipality, but only 9–10 of them are functional in reality.

What prices on market?

If speaking about apartments in particular and notably in Chisinau municipality, prices did not change much compared with those before crisis (just new buildings). Some price falls of 7–10 percent were observed, but depending on areas of the city. So, the average price per square metre is 650–700 euros. Prices of apartments on secondary market are comparable with those before crisis. A square metre in province — towns and districts — costs 250–400 euros. Real estate statistics indicate a rise of sale-purchase deals, but their number is far from the rate recorded before the crisis for several reasons. First, almost all of those willing an apartment choose the finished buildings, so that to sign a sale-purchase contract, not an investment agreement, as many people do not trust anymore in developers who start a new building but do not provide any security that they will finish it.

Homes for everybody, including young families…

In the current market conjuncture a young family has difficulties or cannot afford prices of a home (apartment). Some simple estimates would confirm this fact one more time. For example, a young couple (with a child) who would earn a net monthly revenue of about 8,000–9,000 lei (equivalent to 500 euros) and would save about 4,800 lei or 300 euros a month in the best of cases, would need at least 15 years to gather an amount needed to buy an apartment in Chisinau. But one condition should be fulfilled: the revenue should be constant and prices of apartments and household expenses and other costs should not grow. This would be in fact the best scenario.

Mortgage crediting…

Bankers often say that the banking holds more liquidities than needed and there are little niches to allocate currency, while banks refuse credits to many citizens who need funding to buy apartments. However, there are banks which provide credits, as many of them propose pretty attractive mortgage products, but just for a certain group of persons who have already a multi-annual credit history and give then interesting rates of 9–12 percent. In addition, the low trust of population in the banking, inefficient regulatory framework, unclear estimation of market value of apartments, altogether seriously barred the access of population to mortgage credits and fuelled reticence of commercial banks with providing long-term loans. It would be time to convoke builders, bankers and other experts with the purpose to work out actions capable to reanimate the primary mortgage market, inclusively by granting cheap credits for at least 15–20 years.

Banking sector

Quality of credit portfolio in banking sector is improving…

According to the NBM data for the 1^st quarter of 2011, disadvantageous credits in banking sector count for 10.7 percent of overall credits, by 6.66 percent less than in the same period of last year. Of course, evolutions in this sector are not spectacular but a positive trend is observed. For information, the volume of non-performing loans has doubled in 2009, up to 16.4 percent on system and kept growing up to 17.4 percent in the first half of 2010. Further, they dropped in the second semester of 2010, down to 13.3 percent at the end of the year. Bankers describe the stabilisation of the non-performing loan portfolio as the No.1 accomplishment of the banking sector in 2010. As well, NBM governor has earlier noted that some years would be needed to reach the level of non-performing loans recorded before the economic crisis. According to representatives of the Association of Moldovan Banks, disadvantageous credits count for maximum 5.5 percent of overall loans in European countries. They note that consumer and mortgage loans are an important source of disadvantageous credits. As of March 31, 2011, consumer credits accounted for more than 8 percent of overall loans and real estate, construction and development credits count for 11.3 percent.

Agriculture

Agriculture develops thanks to livestock…

According to the data of the National Bureau of Statistics (NBS), the overall agricultural production made by all farms increased by 8.3 percent in the 1^st quarter of 2011 compared with the similar period of 2010. The rise of agricultural production was due to the growth of livestock by 8.4 percent up to about 99.7 percent of overall agricultural production. The livestock sector enjoyed positive growth trends of almost all animal products. In particular, (raising of) bovines and poultry increased by more than 15 percent in January-March 2011 especially due to the rise of cattle production (raising) by about 14 percent, swine by 25 percent and poultry by more than 5 percent. The rise of cattle and poultry (raising) production was related to the increase of animal and poultry industry and their productivity. On the other hand, milk and egg production of all farms decreased by 2 and 5.4 percent, as the average number of cows declined by 3.4 percent and of layers by 17 percent.

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