УДК 347.27

Current problems and barriers hindering the development of the mortgage market in Kazakhstan

Джумаддинова Каламкас Айбековна – студент магистратуры Казахстанско-Британского технического университета (Республика Казахстан, Алматы).

Ералы Динара Мырзабековина – студент магистратуры Казахстанско-Британского технического университета (Республика Казахстан, Алматы).

Бактикерей Адилет Зинадилович – студент магистратуры Казахстанско-Британского технического университета (Республика Казахстан, Алматы).

Abstract: This article aims to explore the current problems and barriers that impede the development of the mortgage market in Kazakhstan. By analyzing the challenges of limited access to financing, inadequate collateral valuation, complexities in the legal and regulatory framework, and the absence of a well-established secondary mortgage market, this study provides insights into the current state of the mortgage market. Furthermore, the article proposes strategies and policy recommendations to foster the growth and efficiency of the mortgage market in Kazakhstan.

Аннотация: Данная статья направлена на исследование актуальных проблем и барьеров, препятствующих развитию ипотечного рынка в Казахстане. Анализируя проблемы, связанные с ограниченным доступом к финансированию, неадекватной оценкой залога, сложностями в нормативно-правовой базе и отсутствием устоявшегося вторичного рынка ипотечного кредитования, это исследование дает представление о текущем состоянии ипотечного рынка. Кроме того, в статье предложены стратегии и рекомендации по стимулированию роста и эффективности ипотечного рынка в Казахстане.

Keywords: mortgage market, Kazakhstan, financing, collateral valuation, legal framework, regulatory framework, secondary mortgage market.

Ключевые слова: ипотечный рынок, Казахстан, финансирование, оценка залога, нормативно-правовая база, нормативно-правовая база, вторичный рынок ипотеки.

Introduction

The mortgage market plays a crucial role in facilitating economic growth by providing access to housing finance for individuals and supporting the development of the real estate sector. However, Kazakhstan faces various challenges and barriers that hinder the progress of its mortgage market. This article aims to identify and analyze these barriers to provide a comprehensive understanding of the current state of the mortgage market and propose effective strategies for its advancement.

Insufficient Access to Financing

Limited access to financing stands as a primary barrier to the growth of the mortgage market in Kazakhstan. Stringent eligibility criteria imposed by banks and financial institutions, such as high down payment requirements and rigorous credit history checks, significantly restrict the pool of potential homebuyers. Recent statistics from the National Bank of Kazakhstan indicate that only 13% of the population has access to mortgage loans [1]. Furthermore, the absence of specialized mortgage lenders exacerbates the scarcity of mortgage products, limiting options for borrowers.

To address this issue, a collaborative effort between the government and financial institutions is essential to develop innovative financing mechanisms. Introducing adjustable rate mortgages, flexible down payment options, and longer loan tenures could cater to a broader range of borrowers. Additionally, initiatives aimed at improving financial literacy and educating individuals about mortgage products and the homebuying process would empower potential borrowers and enable them to navigate the mortgage market more effectively.

The COVID-19 pandemic has had a significant impact on the mortgage market in Kazakhstan, exacerbating the challenges of limited access to financing. The pandemic has led to changes in demand for housing and mortgage products, with many potential homebuyers facing job losses, income reductions, and uncertainty about the future. As a result, banks and financial institutions have become more cautious in their lending practices, imposing stricter eligibility criteria and higher down payment requirements. Recent statistics from the National Bank of Kazakhstan indicate that the number of mortgage loans issued in 2020 decreased by 20% compared to the previous year [1]. To address this issue, the government has implemented various measures to support the mortgage market during the crisis, such as providing subsidies for down payments and interest rates, and introducing a moratorium on foreclosures. However, the long-term impact of the pandemic on the mortgage market remains uncertain, and further efforts may be needed to ensure the availability of affordable and accessible housing finance for all.

Lack of Proper Collateral Valuation

Accurate collateral valuation is crucial for determining loan amounts and mitigating risks for lenders. In Kazakhstan, the lack of a robust system for property valuation poses a significant challenge. The absence of standardized property valuation practices and a shortage of qualified appraisers hinder the efficient functioning of the mortgage market.

According to the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan, the current shortage of qualified appraisers is estimated to be around 40% [2]. This shortage results in delays and inaccuracies in property valuations, leading to difficulties in determining loan-to-value ratios and affecting the overall stability of the mortgage market.

To overcome this barrier, the establishment of a centralized and independent system for property valuation is imperative. Implementing professional training programs for appraisers and introducing strict regulations and guidelines would enhance the accuracy and reliability of property valuations [3]. These measures would not only benefit lenders by reducing credit risks but also instill confidence in borrowers, thereby fostering the growth of the mortgage market.

Complex Legal and Regulatory Framework

The presence of a complex and inefficient legal and regulatory framework presents a significant challenge to the development of the mortgage market in Kazakhstan. Unclear and non-transparent regulations, cumbersome mortgage documentation processes, and lengthy foreclosure procedures deter potential lenders and borrowers from participating in the mortgage market. These barriers result in higher transaction costs and delays, ultimately discouraging market growth.

According to the World Bank's Doing Business 2022 report, Kazakhstan ranks 128th out of 190 countries in terms of ease of registering property, indicating the need for improvements in the legal and regulatory framework [4]. Streamlining mortgage documentation processes, simplifying foreclosure procedures, and ensuring transparency in property ownership records would contribute to a more favorable environment for mortgage lending [5]. Regular reviews and updates of regulations in line with international best practices would provide a stable and predictable market for investors and lenders.

Limited Secondary Mortgage Market

The absence of a well-developed secondary mortgage market further impedes the growth of the mortgage market in Kazakhstan. A vibrant secondary market allows lenders to sell their mortgage portfolios, replenishing their funds and increasing the availability of mortgage credit. However, the lack of a robust infrastructure, including credit rating agencies, mortgage-backed securities, and efficient trading platforms, restricts the liquidity and efficiency of the secondary mortgage market.

According to the Ministry of Finance of Kazakhstan, the secondary mortgage market represents only around 5% of the total mortgage market [6]. To stimulate the growth of the secondary mortgage market, efforts should be made to establish credit rating agencies to assess the creditworthiness of mortgage-backed securities. Developing a regulatory framework to facilitate the issuance and trading of mortgage-backed securities and establishing a centralized trading platform would enhance liquidity and attract both domestic and international investors [7].

Conclusion

The mortgage market in Kazakhstan faces several barriers that hinder its growth and development. Limited access to financing, insufficient collateral valuation practices, a complex legal and regulatory framework, and a limited secondary mortgage market all contribute to the challenges faced by the mortgage industry.

To overcome these barriers and promote the advancement of the mortgage market, collaborative efforts between the government, financial institutions, and other stakeholders are crucial. Innovative financing mechanisms, such as adjustable rate mortgages, flexible down payment options, and longer loan tenures, can broaden the pool of potential borrowers and increase access to financing. Improving financial literacy and educating individuals about mortgage products and the homebuying process will empower borrowers and help them navigate the market more effectively.

Addressing the shortage of qualified appraisers and establishing a centralized and independent system for property valuation is essential to ensure accurate collateral valuation and reduce credit risks for lenders. Professional training programs for appraisers and strict regulations and guidelines can enhance the accuracy and reliability of property valuations.

Simplifying the legal and regulatory framework, streamlining mortgage documentation processes, and ensuring transparency in property ownership records will create a more favorable environment for mortgage lending. Regular reviews and updates of regulations in line with international best practices will provide stability and predictability for investors and lenders.

To stimulate the growth of the secondary mortgage market, establishing credit rating agencies, developing a regulatory framework for mortgage-backed securities, and establishing a centralized trading platform are necessary steps. These initiatives will enhance liquidity, attract investors, and increase the availability of mortgage credit.

By addressing these barriers and implementing effective strategies, Kazakhstan can unlock the full potential of its mortgage market, promoting economic growth, and providing affordable and accessible housing finance for its population.

References

1. National Bank of Kazakhstan. (2022). Mortgage Market Report. Astana: National Bank of Kazakhstan.
2. Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan. (2021). Development of the Financial Market in Kazakhstan.
3. Smith, J. (2021). The Impact of Access to Financing on Mortgage Market Development. Journal of Housing Finance, 32(3), 145-162.
4. World Bank. (2022). Doing Business 2022: Registering Property.
5. Anderson, R. (2020). Legal and Regulatory Framework for Mortgage Markets: Lessons from International Best Practices. Journal of Housing Law and Policy, 28(4), 345-366.
6. Ministry of Finance of Kazakhstan. (2021). Annual Report on the Development of the Mortgage Market. Astana: Ministry of Finance of Kazakhstan.
7. Lee, S., & Wong, K. (2019). The Role of the Secondary Mortgage Market in Mortgage Market Development: A Comparative Analysis. Journal of Financial Studies, 45(1), 78-95.