First Home Program is an example of good initiative, implemented at the right time, which yet continuesby inertia and thus amplifies rather than solve the real estate market problems. Started in 2009, during the economic and real estate crisis, First Home Program was meant to temper the market decline and to stimulate the purchase of housing with guarantees provided by the state. I highlight that I am not for interventionism, due to the fact that each time the state involves in a particular economic sector, it generates distortions. The Parliament and the Government should be limited to ensure a predictable legal framework for economic activities, not to directly intervene in the economy.

I admit, however, that during the crisis, the program had also benefic effects, stimulating the demand on the real-estate market and providing access to financing at a time when banks did not grant loans any more. In addition, the First Home Program had a pronounced social characteristic and enabled young people to acquire affordable housing.

After two to three years of sustained economic growth, in my opinion the state’s involvement in the real-estate market is no longer appropriate, on the contrary. Now, through this program, the state does nothing but distorts the real-estate market by stimulating demand and contributing to an exacerbated growth of prices, that in big cities again reached high levels. Thus, the state increases the risk of a real-estate bubble that can explode at any time.

In 2017, the Government decided to eliminate the tax on real-estate transactions with a value lower than EUR 100,000 and intends to eliminate the VAT on new houses. These are positive measures for stimulating the real-estate industry and I consider that would be the time for the state not to be involved anymore in the financing area, by granting guarantees to buyers, and so by boosting the demand. In the best case scenario, we could have a First Home Program with an exclusively social characteristic, intended only for people with low income. Otherwise, its purpose, namely to provide young people access to real-estate market is perverted, and the prolongation of the program will generate an opposite effect, helping the increase of real-estate prices and making housing less affordable.

In the last years, after the powerful decline of interest rates, banks’ lending offers are competitive, and advance payments and interests charged by credit institutions are reasonable. Thus, we have no major differences between credit conditions of the First Home Program and mortgages offered by banks. State intervention in the market generates, in addition to the effects already mentioned, a profit growth of banks and property developers, and the indebtedness of the population. It is not normal for banks to take half of the risk related to a real estate credit, but to collect 100% of the profit.

Dr. ec. Adrian CRIVII, FICS, REV, MAA
Director general DARIAN DRS SA