Decline and depression: the impact of the global economic crisis on housing markets in two post-socialist states

Abstract

The goal of this paper is to outline the main factors influencing the diverse consequences of the global economic crisis on housing and mortgage markets in two post-socialist economies—the Czech Republic and Hungary. In the former there was a mild decline of markets while in the latter there has been a depression of markets. The paper also contributes to the convergence and divergence debate on housing policies in Europe. In the last two decades the post-socialist states have moved toward a market-based housing system (a convergence trend), but substantial differences have simultaneously emerged in tenure structure, housing finance institutions and housing policies (divergence trends). The Czech Republic and Hungary have introduced efficient market reforms in their economy but they have followed different paths in reforming their housing systems. This article shows that divergence in housing systems explains some of the differences in the impact of the global economic crisis on the housing and mortgage markets. However, the article concludes that housing policy responses to the impact of the global economic crisis on housing markets may on balance reinforce convergence trends.