THE MORTGAGE LENDING DURING THE TIME OF MARTIAL LAW

Abstract

This research delves into the dynamics of the Ukrainian mortgage market from 2019 to 2023, offering a comprehensive analysis of key trends and shifts. The study reveals a substantial increase in lending activities in 2019, followed by a downturn in the first half of 2020 due to the COVID-19 pandemic's impact. From Q3 2020, a resurgence occurred, reaching its peak in 2021 amid economic stabilization, construction growth, and improved public financial sentiments. However, a complete halt in new loan issuance transpired in Q2 2022 following the invasion by an aggressor country. The recovery in 2023 was facilitated by the launch of the state program "eOselia." Notably, real estate transactions dwindled in 2022, signifying a more profound decline than the mortgage market, with the share of transactions through mortgages dropping from 3.2% in 2021 to 2.0% in 2022. Crucial insights are drawn from the number of banks engaging in mortgage lending. The market, once comprised of 20 banks, dwindled to only 4 by December 2022. The revitalization in 2023 resulted from the "eOselia" initiative, initiated by the State Company "Ukrfinzhytlo." By November 2023, six banks, including "Oschadbank," "PrivatBank," "Ukrgazbank," "Ukreximbank," Sky Bank, and "Globus Bank," joined the program. Figure 2 illustrates the resurgence of mortgage lending post the launch of "eOselia" in October 2022. Despite a downturn in March and April 2023 due to funding issues, the program witnessed a significant increase, approaching pre-war 2021 levels by September and October 2023. The analysis asserts that the current mortgage market is predominantly sustained by the "eOselia" program, constituting 93.3% of all mortgage issuances. The initiative has effectively balanced credit costs, involving the government in the banking-customer relationship. Moreover, the average mortgage amount in Ukraine has risen by 66% since the full-scale invasion. This increase is attributed to currency exchange rates, inflation, and the post-war housing financing under the "eOselia" program. In regional dynamics, the capital, Kyiv, witnessed a migration of demand to the Kyiv region, driven by housing affordability in satellite cities and broader housing options under the "eOselia" program. Conversely, eastern regions faced challenges in resuming mortgage lending due to front-line proximity and heightened risks. In conclusion, the organic growth of mortgage lending until 2021, the post-war decline, and the subsequent revival underscore the pivotal role of the "eOselia" program. While instrumental in real estate market development and social housing accessibility, the program introduces a level of market monopolization. In the face of war-related uncertainties, short-term strategy emphasizes expanding the "eOselia" program, diversifying the target audience, and regional market differentiation. For the long term, a post-war mortgage issuance approach aligning with European models could address demographic challenges and enhance housing affordability.