Subsidising mortgages by the state is neither a good nor a realistic step, according to analysts contacted. It would deepen the state budget debt at a time of consolidation and would not make mortgages more affordable. Subsidising mortgages would cause property prices to rise. At the same time, it would be a step against the monetary policy of the Czech National Bank (CNB), which uses higher rates to control high inflation. The idea that state-subsidised mortgages could be created, according to building sellers and people in the construction industry, was highlighted by Hospodářské noviny on Monday. According to them, discounted state-supported mortgages can be taken out, for example, in Poland and Austria.
According to Petr Bartona, a data analyst at Datarun platform, subsidised mortgage prices would fall at most in the first weeks. The price of a mortgage is determined by people’s ability to repay it, he said, and the lender would effectively charge the client what they would be able to pay. He added that the fall in construction output was not primarily due to expensive mortgages but to the high interest rates that builders had to pay.
“People know that they are taking out a mortgage for 20 to 30 years, of which now that temporarily higher interest rate will only last for a maximum of five per cent of the total time. Against that, a developer can spend maybe half the time paying it off under a high interest rate. Interest affects construction much more than demand, and the proposed subsidy does nothing about that,” Barton said.
Hypothetical support from the state is also unimaginable for Creditas Bank economist Petr Dufek. Interest rates on mortgages are now slowly falling and becoming more affordable.
“Mortgages are still basically subsidised and I cannot imagine that this support will be extended. The mere fact that interest can be deducted from the tax base means a saving on income tax paid by the borrower and also reduces the revenue for public budgets. Just because the construction industry is a cyclical sector is no reason for its fluctuations to be borne by other taxpayers,” said Dufek. A further increase in support for owner-occupied housing above the current interest write-offs on loans paid would also reinforce the imbalance in the housing market, according to the Ministry of Regional Development.
Martin Gürtler, an economist at Komerční banka, also thinks that subsidising mortgages would lead to a further redistribution of wealth from the poor to the rich and at the same time deepen the state budget debt. “It is necessary to recall that from a long-term perspective, the Czech real estate market suffers from a significant excess of demand over supply, not the other way around. Subsidising mortgages would only worsen this situation. Therefore, if the state’s attention should be focused anywhere, it should be on the supply side,” said Gürtler.
The idea of subsidised mortgages is supported, for example, by the Brickmakers’ Association of Bohemia and Moravia, brick manufacturer Wienerberger, and building products retailer DEK. The Czech Chamber of Commerce and the Union of Construction Entrepreneurs are backing their idea towards the government.
Source: Hospodářské noviny and CTK
