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Housing Finance Market Overview
In Slovenia, housing finance is mainly raised from banks, with the Nova Ljubljanska Banka taking the largest market share. By the turn of the century, the Slovenian housing finance industry has grown by leaps and bound. The mortgage debt to GDP ratio increased from 0.3 per cent in 2000 to 8 per cent in 2007.
The Market from the Perspective of the Demand Side
In Slovenia, the usual maximal loan-to-value ratio amounts to 70 per cent though the average LTV ratio is far below this level with around 50 per cent. Most mortgages taken out were variable interest loans. The Slovenian fiscal regime allows for the partial deduction of mortgage interest paid up to a set maximum. The government grants as well a premium on certified savings contracts with a minimal contract time of 5 years. The premium amounts to 8.33 to 10.42 per cent of the amount saved up to a set maximum.
House Price Development
House prices in Slovenia rose strongly from 2000 to 2007 with an annual average growth rate of almost 15 per cent. Since the end of 2008, house prices started to fall slightly.
Special Characteristics of the Market
Slovenia has a contractual savings system, which is constructed along the lines of the French épargne logement system. It is characterized by low interest rates on loans and a government interest premium paid on savings. In principal, it can be offered by all deposit banks.
The banks finance most mortgage lending still through deposits and by borrowing from banks abroad. The issuance of Covered Bonds or the securitisation of mortgages plays only a very marginal role but is assumed to grow in importance.