Mortgage Market Development, Savings, and Growth

The Role of Affordable Mortgages in Improving Living Standards and Stimulating Growth: A Survey of Selected MENA Countries

“…Financial sector development and liberalization can ensure positive returns to savings by improving market efficiency and lowering financing costs, and can stimulate higher savings. Li (2001) has argued that, for most low-and middle-income households, purchase of a home represents the largest share of household saving and investment. Li's simulations indicate that, when borrowing constraints are very restrictive-as in most MENA and other developing countries-households may defer or even forsake purchase of a home, and attain a certain utility maximizing allocation of consumption and saving where saving is lower than it would be, if households had access to mortgage fmancing.…”

Mortgage markets in Middle East and North African countries: Market development, poverty reduction, and growth

“…Financial sector development and liberalization can ensure positive returns to savings by improving market efficiency and lowering financing costs, and can stimulate higher savings. Li (2001) has argued that, for most low-and middle-income households, purchase of a home represents the largest share of household saving and investment. LiÕs simulations indicate that, when borrowing constraints are very restrictive-as in most MENA and other developing countries-households may defer or even forsake purchase of a home, and attain a certain utility maximizing allocation of consumption and saving where saving is lower than it would be, if households had access to mortgage financing.…”

“…8 See the case study by Siembieda and Moreno (1999) on Mexico, and the housing finance reforms and developments in that country. 9 For a review of the literature and empirical results for some MENA countries, see Li (2001). ensuring positive returns, and such returns will probably remain high due to rapid urbanization (because of rapid population growth, housing markets have a large growth potential which could be tapped only with the development of mortgage markets); (b) housing provides the best and most secure collateral against market fluctuations and other borrowing, and yields a positive rate of return, at least in the long run; (c) housing prices are less volatile than prices of other assets (for example, financial assets); (d) availability of housing increases labor mobility, hence employment potential; (e) general subsidies in many countries could be better targeted through housing and mortgage markets.…”

Housing and Housing Finance - A Review of the Links to Economic Development and Poverty Reduction

“…In other words, less developed mortgage markets are associated with higher savings rates. Li (2001) applied a six-period overlapping generations model to data for Middle East countries in which mortgage markets were very small, yet population growth and thus the demand for housing was high. Consistent with Japeeli and Pagano (1994), he found that for a given tenure choice, the more restrictive the liquidity constraints in the mortgage market, the higher the savings ratio.…”