In June, the National Bank of Serbia, in an attempt to encourage the sale of apartments and thus changed the construction industry, changed the regulations so that banks could offer citizens, buyers of the first apartment, a housing loan with a 10% share, twice less than before.
The very next day, the state-owned Postal Savings Bank announced that it would offer customers this opportunity. Both then and now.
The governor of the National Bank of Serbia, Jorgovanka Tabakovic, complained yesterday that the banks did not accept the recommendation to reduce the participation for housing loans from 20 to 10 percent.
“Only one bank, a domestic one, provides a service to citizens to raise housing loans with a share of 10, not 20 percent. Obviously, banks think that they earn enough from other services, but in the long run, that will not be good for banks, because they have to fight for their clients,” said Tabakovic.
It is known that banks are not disgusted with profit and that they would use all sorts of tricks, sometimes on the edge of morality, to reach clients and make money, but it seems not now. Obviously, in the crisis and uncertainty brought by the corona virus pandemic, it is more important for them not to lose than to potentially make money.
Veroljub Dugalic, professor at the Faculty of Economics in Kragujevac and long-term general secretary of the Association of Serbian Banks, points out that the reason why this recommendation was not accepted by other banks is caution.
“Reducing the participation for the loan from 20 to 10 percent means higher monthly loan installments. Banks are now in a position to consider whether customers will be able to repay it. They ask themselves the question of who will lose their job, the question of uncertainty. The epidemic does not stop and that is why banks are cautious. In this case, the NBS wants to stimulate the economy, and the banks want to protect their own and the interests of the shareholders,” Dugalic notes.
He points out that the NBS should not be judged because it wants to push the economy, but also the banks.
“The goal of banks is to give loans. That, to put it simply, is the meaning of their business. Under normal circumstances, banks chase customers to take out a loan. When the pandemic passes and the situation normalizes, of course, the banks will be ready and it will be easier to approve housing loans,” Dugalic estimates, because then there will be less risk, ie greater security.
That the NBS measure did not have any effect is also shown by the data of the Republic Geodetic Authority. According to the report on the real estate market for the third quarter, in which the recommendation was valid, the share of buying apartments on credit in relation to cash was even reduced.
In the first and second quarters, the share of loans was over 45 percent, and in the third quarter it dropped to 37 percent, the same as in the same period last year.
In absolute terms, the number of apartments sold increased by 45% from June to the end of September compared to the previous quarter in which there was a state of emergency, but the number of apartment purchases on credit increased by only 18%.
The governor also referred to non-performing loans, saying that our country is among the best, because it has only about 3.5 percent of problem loans.
“The NBS has mechanisms to help banks maintain that level. In addition, we stimulated banks to give the economy dinar loans with interest rates that are practically equal to those for foreign currency loans,” said Tabakovic.
For Dejan Soskic, a professor at the Faculty of Economics, it is not surprising that banks did not take risks and offered housing loans with a smaller participation.
“In a crisis, we should not encourage over-indebtedness of citizens. Reducing participation has the effect of maintaining high real estate price levels. It was necessary to let real estate prices fall and then have citizens buy them at that lower price. This does not benefit either the citizens who can buy less square meters for the same money, or the banks to which these loans could potentially represent the growth of non-performing loans in the future. This measure is useful only to producers and sellers of apartments, and in Belgrade the prices are already the same as in Budapest, which is not logical,” Soskic said.
He points out that there are already housing loans without participation, and they are dinar loans, while for loans with a foreign exchange clause, participation is required precisely because of the foreign exchange risk.
“The ratio of the size of the debt to the value of real estate loans is either 80 percent (or 20 percent of the share) or the ratio is even more rigorous in order to prevent the creation of a real estate price bubble and for clients not to over-indebted. The rule is that the higher the participation, the easier it is for people to repay the loan,” he concludes.
Asked whether that means that the state Postal Savings Bank was exposed to risk, Soskic said that it depends on the number of approved loans, the amount of non-performing loans and other indicators of the bank, Danas reports.
