Asian mortgage markets

EMF Hypostat

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Date Published 2012
Primary Author Masahiro Kobayashi
Other Authors
Country Hong Kong SAR, China, Japan, Korea, Republic of


Compared to Europe, the Asian mortgage market is extremely heterogeneous and it is therefore difficult to summarize its characteristics and the related ongoing trends in the nutshell. In a number of Asian countries, the mortgage market is dramatically changing providing opportunities as well as challenges. To give a flavor, there are two countries with a population of over 1 billion people: China and India. In terms of size and economies (i.e. GDP), the countries with the biggest economies after the USA are China and Japan. Asia is regarded as the centre of growth for the global economy for decades to come, however, as of today, mortgage markets are still at a developing stage in many countries in the region. In terms of size of the mortgage market, excluding the USA, Japan has the largest mortgage market. China, which has the second largest economy in the world, follows the UK, Germany and France and has a GDP almost equivalent to these three major European countries combined. The market size is much smaller in countries such as India, although its population is twice as large as the combined EU27 countries. The smaller market size in some Asian countries can be attributed to the lower stage of development of the economy as a whole. There are several countries in Asia where per capita GDP exceeds USD 30,000; Japan, Singapore and Brunei Darussalam. However, per capita GDP for the vast majority of Asian countries is far less than USD 10,000. In advanced economies, the mortgage market size to GDP ratio has no correlation with the GDP per capita. Some countries prefer to provide social housing or rent assistance rather than promoting homeownership. However, in emerging economies, there is a strong correlation observed between outstanding mortgage to GDP ratio and GDP per capita. At the embryonic stage of development, when poverty alleviation is a priority, housing policy tends to focus on improving the accommodation in slums and/or on intervention by the government through direct provision of affordable rental housing. As middle class formation advances, promotion of homeownership becomes the new priority with employment markets moving from informal to formal, thereby expanding the possibilities for banks to extend mortgages.

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