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As a consequence of lenient mortgage lending criteria applied nowadays by banks, more and more Poles can afford to buy their own dwelling. According to AMRON-SARFiN Report 2/2021, the number of loans granted in the second quarter of 2021 increased by 17.21% compared to the previous quarter. Before implementing a plan to purchase a dwelling, it is good to know all details related to legal aspects of the transaction, including types of contracts and rights they ensure for the contracting parties. In June 2021, an amendment to the Act on the Protection of Rights of Buyers of Housing Unit or Detached Houses and the Developer Guarantee Fund was announced, which provides the legal basis for agreements with developers. The amended Act will enter into force July 1, 2022.

There are several types of contracts signed by a purchaser and a developer, depending on the stage, at which the contract is concluded: a reservation agreement, a developer agreement, a preliminary agreement and an ownership transfer agreement. How do they differ and what should we pay special attention to?

Reservation agreement

According to Article 29.1 of the Act of May 20, 2021 on the Protection of Rights of Buyer of Housing Unit or Detached House and the Developer Guarantee Fund, ‘a reservation agreement is an agreement between a developer or an entrepreneur other than a developer (…) and a person interested in the sale offer (…), the subject of which is an obligation to temporarily exclude from the sale offer a dwelling or a detached house selected by the reserving party.’ A reservation contract is most often concluded at the initial stage of a project, when the booker is planning to buy an estate, but, for example, is not 100% sure, is looking for other offers or has not yet received a credit decision. In practice, the agreement requires the developer to exclude the property from sale and is often followed by a developer agreement. In order for a reservation agreement to be valid, in addition to the standard elements, it is required to include:

• the price of the dwelling or detached house;
• the amount of the reservation fee;
• the period during which the subject of the agreement is excluded from sale;
• the location of the dwelling in the building (in case of a flat);
• the usable area and the layout of the rooms.

As regards the reservation fee, the previous legislation did not regulate either the amount of the fee or the conditions for its reimbursement in the event of termination of the contract. Accordingly, the developer may have drafted an agreement that would disadvantage the booker, for example, despite a negative credit decision that is beyond the booker’s control, the booker will not receive a fee refund. The amendment to the Act clearly regulates that the reservation fee cannot exceed 1% of the price of the dwelling and in case of conclusion of the developer agreement it is credited towards the purchase price of the property. The new regulations also specifies the cases, in which the reservation fee is refunded to the reserving party:

• failure to obtain a positive credit decision or a promise to grant a credit;
• the developer – without informing the reserving party – made changes to the information prospectus or its attachments;
• if the sale agreement was preceded by the reservation agreement, and the developer or the entrepreneur failed to remove the defects reported in the acceptance protocol, as a result of which the buyer did not sign the sale agreement (double fee to be reimbursed)
• if the developer or the entrepreneur fails to comply with the terms and conditions of the reservation agreement (double fee to be returned).

A reservation agreement does not oblige the booker to buy the property, but it gives the possibility of excluding the property from sale for a certain period of time, during which the booker has time to arrange the formalities related to obtaining a loan. Signing a reservation agreement is not mandatory, but it is usually the first step in the process of buying a property from a developer and precedes the conclusion of a developer agreement.

Developer agreement vs. preliminary agreement

Both the developer agreement and the preliminary agreement constitute a mutual obligation of the developer and the buyer to sign an agreement on the transfer of ownership rights to the estate in the future. This means that at the time the contract is signed, the buyer does not yet have rights to the estate. The difference between a development agreement and a preliminary agreement is the condition of the property. A developer agreement regulates the process of acquisition of an estate in the situation when the investment has not yet been released for use, for example, dwellings have not been separated. In order to formally complete the construction work by a developer, the construction supervision authorities must conduct an inspection. This is necessary for obtaining an occupancy permit for the building – only after that it is possible to conclude a preliminary agreement or an ownership transfer agreement with the buyer. The construction supervision authorities may refuse to issue an occupancy permit when, for example, the investment does not conform to the construction design or does not meet technical, fire or sanitary standards.In such case, the developer is fined with a penalty fee, the amount of which is regulated by the Act of 7 July 1994 – Construction Law. In addition, the construction supervision may order the suspension of construction works, demolition or impose an obligation to bring the building into conformity with the law and the design. For a potential buyer, this means an extended waiting period before being able to live in the estate.

The developer agreement contains more detailed information than the preliminary agreement and its scope is regulated by the Act of 20 May 2021 on the Protection of Rights of Buyer of Dwelling or Detached House and the Developer Guarantee Fund. It includes:

• information regarding the location of the detached house or the location of the dwelling unit in the building and a detailed description of the property;
• the purchase price of the rights to the real estate;
• the date of transfer of the ownership rights to the property to the purchaser;
• information regarding the housing trust account, into which payments are to be made by the purchaser;
• the number of the building permit and the date of commencement and completion of construction works;
• definition of the conditions for withdrawal from the contract and the stipulated amount of interest and contractual penalties;
• buyer’s declaration of acceptance of the information prospectus, which must be prepared by the developer before signing the developer agreement;
• information about the conclusion of a reservation agreement and a reservation fee or about the lack of such an agreement.

In case of a developer agreement, legal regulations impose an obligation on a developer to accept buyer’s payments into a housing trust account. The money accumulated on this account is intended to secure the buyer in case the developer does not complete the construction, for example, in connection with bankruptcy, thanks to which the buyer may recover all or a significant part of the funds paid. In case of a preliminary agreement, the buyer may pay an advance or deposit, which is regulated by the provisions of the Civil Code. In addition to specification of the parties, the subject of the agreement and the price, the preliminary agreement may also include the date of signing an agreement transferring the ownership rights to the real estate to the buyer. A preliminary agreement may be drawn up in form of a notarial deed, but also in an ordinary written form, whereas a developer agreement may be concluded in the form of a notarial deed under pain of nullity. A developer agreement cannot be replaced by a preliminary agreement. A preliminary agreement may be concluded only when the real estate has been approved for use by the construction supervision authorities. Otherwise, it is unlawful to attempt to conclude it. On the other hand, when construction work is still in progress, it is obligatory to conclude a developer agreement. Therefore, both of these agreements are concluded before signing the ownership transfer agreement – the developer agreement when the property is under construction and the preliminary agreement after the construction work is completed. In the situation when the purchaser, at the stage of construction of the real estate, has already entered into a developer agreement, a preliminary agreement is not necessary, because in accordance with the Act, the developer agreement constitutes a mutual obligation of the developer and the purchaser to sign the ownership transfer agreement. If the buyer decides to purchase the property when it has already been released for use, the transfer of ownership agreement may be signed right away, but it also may be preceded by a preliminary agreement. Such a situation would occur, for example, when a buyer applies for a loan and the bank requires a preliminary agreement.

Ownership transfer agreement

An ownership transfer agreement is the final step in the process of purchasing a property on the primary market. It may be concluded only after the technical acceptance of a dwelling, during which the buyer verifies whether the dwelling meets construction standards and has been constructed in accordance with the developer’s agreement, if such has been previously concluded. A protocol is drawn up during the technical acceptance. An ownership transfer agreement, unlike a preliminary agreement, must be drawn up in the form of a notarial deed under pain of nullity.

Summary

The purpose of amending the existing Act is to protect a buyer of a dwelling, who has a number of relate to a reservation agreement or a developer agreement. In turn, both a preliminary agreement and an ownership transfer agreement are governed by the provisions of the Civil Code. The above agreements, despite their differences, are interrelated. Purchasing a property from a developer solely on the basis of a transfer agreement, without entering into any preceding agreements, possible in theory. However, given the high demand for primary market properties, it often proves insufficient.

Daria Łaskowska
Maintenance and Development Specialist

According to the latest estimates of the Central Statistical Office (CSO), the rate of economic growth expressed in Gross Domestic Product (GDP) in the second quarter of 2021 was the highest in the Polish history. It reached as much as 11.1%, so we managed to make up for the pandemic losses. This was not the only record that our country has achieved recently, but unfortunately in this case there is no reason for optimism. Inflation is rising alarmingly and its recent rate is at the highest level for 20 years. In 2021, inflation ranged from 2.4% in February to 5.5% in August year-on-year. In addition, Poland is the second EU Member State after Estonia with the highest inflation.

CHART 1. YEAR-ON-YEAR CHANGES IN CONSUMER PRICE INDEX IN POLAND IN 2000 – 2021

source: Central Statistical Office

The inflation rate is influenced by many different factors. In the current economic situation, a significant increase in prices is caused mainly by the excessive money supply, which is called “the print of the zloty”. The most reliable measure of this phenomenon is the M3 index published by the National Bank of Poland. During the pandemic, the value of money supply at its peak reached PLN 1 746.22 billion (data for June 2020), which meant an increase of as much as 18.1% in annual terms. From March 2020, when the COVID-19 lockdown was introduced, until April 2021 the percentage increase in the amount of money in Poland was double-digit comparing to the previous year. Additionally, a decline in the rate of currency circulation of about 17% was observed. This means that money has been changing its owner more and more slowly, and this also has a strong impact on inflation.

In recent years, practically everything in Poland has become more expensive, including ‘basic necessities’ such as food, electricity and fuel. Considering the topic of this article, the most important question is how much the Poles’ expenditures on real estate market amount to nowadays and how this is affected by the increase in prices of other assets and products.

The most popular subject of trade on the real estate market are dwellings, the average transaction prices of which in 2019 have exceeded the peak achieved during the market boom in 2008 and still continue to grow. The chart 2 presents quarterly dynamics of changes in housing units prices in Warsaw from the beginning of 2006 until the second quarter of 2021, when the average price reached as much as PLN 10 224. The upward trend continues in all major cities in Poland.

CHART 2. AVERAGE TRANSACTION PRICES PER 1 SQM OF A HOUSING UNIT IN WARSAW IN 2006 – 2021

source: AMRON-SARFiN

Analysis of rent rates has shown that the pandemic has contributed to slight drops, to the satisfaction on tenants and to the disadvantage of property owners. The comparison of data from the second quarter of 2020 and 2021 indicated that on the largest housing markets in Poland, the price decreases amounted from 6% to nearly 14%. In Warsaw, the average rental price decreased by 11% in the same period. The price reductions were mainly related to remote working and studying, which enabled tenants to move out of the big city and thus save on housing costs. However, the rental market seems likely to rebound and there probably will be a return to the pre-pandemic situation, provided that the government’s COVID-19 restrictions will not be as stringent as they were a year ago.

Dwellings are not the only type of property that is getting more and more expensive every year. Prices of single-family houses are characterized by even higher growths. According to the Bankier.pl portal, in the first quarter of 2021 the yearly increases ranged from 12.6% in Warsaw to 24.9% in Gdansk. Two-digit increases were also recorded in case of building plots. The increases occurred basically in all voivodships, with the highest ones in the Voivodeship of Podlassia and the Voivodeship of Lower Silesia . In the first half of 2021, average prices there have risen by 32% and 28% respectively as compared to the same period last year. In the Voivodeship of Mazovia, the increase amounted to 22%. The records on the real estate market are fuelled, among others, by high prices of building materials, which have doubled in the last year. This causes uncertainty mainly among consumers, whose earlier cost estimates for building a house or apartment renovation are highly underestimated and it is not known whether to postpone the investment and wait for declines in prices or spend more now but complete the planned undertaking. This uncertainty also applies to developers who explain the high prices on the primary market with the rising costs of materials and construction professionals.

It would seem that galloping property prices must cause lower demand on the housing market. However, this is not happening and in recent months the construction sector has achieved historically best results. Many investors admit that they are spending the savings gathered over the years right now due to high inflation and the lack of another, profitable alternatives to invest money. Investment in real estate is considered by Poles as safe and secure. Most believe that they will never lose money on a real estate investment and that prices will continue to rise or at least not fall for a long time. Such optimism can lead to a loss, but due to the lack of adequate financial knowledge to invest in the stock market or due to the inability to start a business, choosing real estate is a reasonable solution, provided that it is not financed by a large loan.

In a pessimistic scenario of constantly growing inflation, it may be necessary to raise the reference rate of the National Bank of Poland, which currently stands at only 0.1%. Such a low level translates to cheap mortgage loans, but it should be remembered that with a variable interest rate, the instalment will most likely increase. The question is by how much? It may come as a surprise for those borrowers, who are not aware of the risk, but for example with a loan amount of PLN 300 000 for 30 years, an instalment of PLN 1 150 and the standard bank margin of 2.15%, an interest rate rise by only 1 point percentage will increase the monthly instalment by about PLN 160. Such a remedy against the growing inflation is very likely to be introduced and it may significantly affect the wealth of Poles, just like loans denominated to Swiss Franc. Today hardly anyone remembers that 10 years ago interest rates fluctuated around 5%. Perhaps more expensive loans will temper the optimism on the real estate market. On the other hand, there are government’s announcements on a new housing programme that will enable Poles to take a mortgage loan without any own contribution. Unfortunately, this may result in higher loan margins for loans taken by the programme’s beneficiaries and this may lead to problems with future loan repayments.

CHART 3. REFERENCE RATE OF THE NATIONAL BANK OF POLAND IN 1998 – 2021

source: National Bank of Poland

The most disturbing fact is that representatives of the Polish government, including the current President of the National Bank of Poland and Chairman of the Monetary Policy Council, Adam Glapiński, do not seem to care about the increase in inflation. They explain that we are catching up with Europe and Poles’ earnings are also growing. However, it is not happening as fast as the price increase. In times of high inflation and low interest rates, citizens withdraw savings from unprofitable deposits and often invest money on the real estate market. It is undeniable that there is a correlation between the inflation rates and property prices but borrowers must be aware that they will most likely pay higher mortgage payments in the future.

Ewelina Staruch
Real Estate Market Analyst

Record low interest rates, which have been maintained for several years, and loosening of the banks’ requirements regarding down-payment have a strong impact on high demand on the housing market, which translates into economic growth. Since 2016, more and more housing loans have been granted each year. A slowdown of the upward trend could be observed only in 2020. According to the data presented in the AMRON-SARFiN Report, the number of housing loans granted in 2020 amounted to 204 170, which was lower by 3.13% than the number recorded in 2019. The value of newly issued mortgage loans in the indicated period amounted to PLN 60.671 billion, which is an increase by 9.29% as compared to the previous year. Data presented by Central Statistical Office (GUS) are comparable, where the number and value of dwellings sold annually have been gradually increasing since 2015.

CHART 1. Number and value of new housing loans granted from 2015 to 2020

source: self-study based on the SARFiN System data

CHART 2. NUMBER AND VALUE OF DWELLINGS SOLD IN TOTAL MARKET TRANSACTIONS FROM 2015 TO 2019

source: self-study based on data of Central Statistical Office

As stated in the Ministry of the Interior and Administration (MSWiA) Report on execution of the act on real estate acquisition by foreigners in 2020, last year foreigners purchased more than 7 400 dwellings with a total area of almost 442 000 sqm. This was a significant decrease compared to 2019, when foreigners purchased more than 8 400 flats with an area of nearly 511 000 sqm. In comparison, in 2018 the Ministry of the Interior and Administration registered the acquisition by foreigners of 7 043 dwellings with a total area of over 426 000 sqm. The number of flats sold to foreigners in 2020 is lower by 12.41% compared to 2019, but still higher by 5.55% compared to 2018. The percentage of dwellings purchased by foreigners in relation to the total number of flats sold in 2017 was 2.68%, in 2018 it accounted for 3.46%, and in 2019 – 4.07%. Despite an apparent slowdown in property sales among foreign nationals in 2020, caused by the pandemic and the associated restrictions that have extended the application process for permit to buy a flat, as well as limited migration to Poland, interest of foreign buyers in Polish apartments remains strong.

CHART 3. NUMBER OF ENTRIES TO REGISTERS REGARDING DWELLINGS PURCHASED BY FOREIGNERS ON THE BASIS OF PERMITS AND WITHOUT OBLIGATION TO OBTAIN THE PERMISSION AND THE TOTAL AREA OF PURCHASED DWELLINGS FROM 2011 TO 2020

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2011 – 2020

TABLE 1. PERCENTAGE OF DWELLINGS ACQUIRED BY FOREIGNERS ON THE BASIS OF PERMITS AND WITHOUT OBLIGATION TO OBTAIN THE PERMISSION IN TOTAL NUMBER OF DWELLINGS SOLD UNDER MARKET TRANSACTIONS IN 2015 – 2019

2015	2016	2017	2018	2019
2.50%	2.83%	2.68%	3.46%	4.07%

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2015 – 2019 and data of Central Statistical Office

In case of commercial premises, the situation is similar. The upward trend observed since 2013 slowed down only in 2020, when foreigners purchased over 2 000 commercial premises (less by 19.4% compared to 2019), in which almost 2 500 properties were sold. The total area of commercial premises purchased in 2020 amounted to 271 000 sqm.

CHART 4. NUMBER OF ENTRIES TO REGISTERS REGARDING COMMERCIAL PREMISES PURCHASED BY FOREIGNERS ON THE BA-SIS OF PERMITS AND WITHOUT OBLIGATION TO OBTAIN THE PERMISSION AND THE TOTAL AREA OF PURCHASED DWELLINGS FROM 2011 TO 2020

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2011 – 2020

For years, the number and area of dwellings purchased by French, German, British and Italian nationals have remained stable and represented a significant share of transactions among foreigners. A notable increase in interest in housing in Poland can be observed among the citizens of Belarus, Russia, China and Belgium. However, it is the citizens of Ukraine who, constantly for the past 5 years, have been leading among foreigners in the purchase of apartments – in 2020 they purchased 3 200 apartments, which accounted for 36% of all transactions. Such a result was influenced by the growing number of Ukrainians living permanently in Poland and binding their future with Poland.

Despite a slight decline in 2020 compared to the previous year (by 2.7%), caused by restrictions on migration to Poland due to the COVID-19 pandemic and a slowdown in housing acquisition processes, 2020 was the second year in a row, when Ukrainian nationals purchased more than 3 times as many apartments as Germans. Moreover, the total floor area of residential units bought by Belarusians over the past 10 years has increased five times and their share in the structure of buyers in 2020 was equal to 5.5%.

Similarly, in case of the Chinese, who in the previous year purchased dwellings with a total area three times larger (10 584 sqm) than in 2011 (2 708 sqm). Demand for apartments in Poland among Belgians and Indian nationals is also noticeable. Belgians purchased 8 477 sqm of flats last year, which was an increase by 65% compared to 2019, whereas Indian nationals purchased 5 526 sqm in 2020, i.e. more by 45% compared to 2019.

TABLE 2. TOTAL AREA OF DWELLINGS (IN SQM) PURCHASED BY FOREIGNERS ON THE BASIS OF PERMITS AND WITHOUT OBLI-GATION TO OBTAIN THE PERMISSION (BY THE COUNTRY OF PURCHASER’S ORIGIN) – SELECTED COUNTRIES IN 2011 – 2020

	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	TOTAL
Austria	6 671	6 640	3 801	4 752	5 999	6 569	8 314	9 193	7 265	7 124	53 016
Belgium	1 630	3 790	2 834	3 855	3 223	3 152	3 093	5 244	5 150	8 477	35 026
Belarus	4 672	7 099	7 036	6 805	8 806	11 590	13 469	20 350	26 826	24 442	119 324
China	2 708	2 269	3 119	4 875	5 285	5 994	8 480	9 380	11 021	10 584	58 739
Cyprus	6 434	6 443	5 884	12 598	8 631	7 402	4 580	4 661	24 779	8 268	76 803
Czech Republic	1 868	791	1 557	2 665	2 417	3 642	2 148	5 329	3 168	3 197	24 123
France	10 051	10 311	11 382	15 395	11 678	13 976	15 381	16 885	18 248	14 878	117 823
Spain	11 325	19 621	5 541	4 083	2 721	7 465	6 078	6 289	9 147	5 590	46 914
Holland	5 403	11 054	8 335	6 181	9 773	4 385	6 172	6 895	6 976	7 520	56 236
India	1 142	1 145	801	970	1 500	2 471	2 400	3 547	3 792	5 526	21 006
Ireland	8 162	3 333	5 085	3 334	2 429	1 797	1 863	2 679	5 127	3 385	25 700
Israel	4 582	35 193	3 447	6 770	5 731	14 349	5 726	14 240	16 310	6 174	72 747
Luxemburg	692	11 882	1 271	2 319	1 865	1 201	10 318	1 451	1 946	1 429	21 800
Germany	34 107	36 804	36 889	32 485	36 164	43 081	40 179	64 349	55 485	46 821	355 452
Russia	6 644	8 864	7 777	6 685	8 467	8 806	9 417	12 558	15 330	14 100	83 140
Slovakia	1 611	2 246	1 511	2 595	1 963	2 770	2 085	3 359	5 862	2 597	22 741
Sweden	7 063	5 795	5 639	6 337	7 021	8 003	9 346	8 996	10 052	6 237	61 631
Turkey	1 057	1 286	773	1 075	1 909	2 753	3 102	5 983	4 059	5 576	25 231
Ukraine	12 597	17 109	18 665	24 558	35 372	64 118	71 264	110 370	162 483	158 027	644 858
USA	6 308	4 917	9 080	6 017	6 668	6 596	5 714	7 174	8 218	4 789	54 256
Great Britain	17 766	13 506	18 576	15 068	15 254	17 857	17 398	23 884	22 297	17 937	148 270
Vietnam	7 498	3 739	2 951	3 438	3 398	3 382	3 799	7 856	3 932	5 554	34 310
Italy	10 017	7 041	10 205	9 841	10 455	11 939	11 602	16 750	18 275	14 151	103 219
other countries	32 165	31 245	33 124	33 195	32 841	41 654	42 627	58 818	65 243	59 258	821 057
TOTAL	202 175	252 122	205 283	215 895	229 569	294 952	304 555	426 242	510 989	441 641	3 083 422

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2011 – 2020

According to the data presented by the MSWiA, for years the largest area of dwellings have been purchased by foreigners in the Voivodeship of Mazovia – in 2020, there were 137 000 sqm, which accounted for 31.08% of the total area of residential properties bought by foreigners. The Voivodeship of Lower Silesia was on the second place, where dwellings with a total area of 68 000 sqm were purchased (15.35%). The Voivodeship of Lesser Poland was third  flats with a total area of 65 000 sqm were sold there (14.63%). Slight decreases were recorded every year in the Voivodeship of Pomerania and the Voivodeship of Silesia. Other provinces were much less popular, although their share remained stable.

TABLE 3. STRUCTURE OF THE TOTAL AREA OF DWELLINGS ACQUIRED BY FOREIGNERS ON THE BASIS OF A PERMIT AND WITHOUT THE OBLIGATION TO OBTAIN A PERMIT DUE TO THE VOIVODESHIP, WHERE THE REAL ESTATE IS LOCATED IN THE YEARS 2015 – 2020

voivodeship	2015	2016	2017	2018	2019	2020
The Voivodeship of Lower Silesia	10.94%	13.70%	13.37%	14.84%	14.33%	15.35%
The Voivodeship of Cuiavia and Pomerania	1.85%	2.54%	2.58%	2.05%	2.56%	2.50%
The Voivodeship of Lublin	1.75%	1.81%	1.49%	1.76%	1.76%	1.49%
The Voivodeship of Lubusz	1.34%	1.49%	1.64%	2.02%	2.33%	2.74%
The Voivodeship of Lodz	3.07%	2.34%	2.93%	2.84%	3.52%	4.85%
The Voivodeship of Lesser Poland	12.62%	15.29%	15.98%	14.38%	14.26%	14.63%
The Voivodeship of Masovia	37.63%	35.92%	35.11%	35.88%	34.52%	31.08%
The Voivodeship of Opole	1.38%	1.43%	1.60%	1.28%	1.66%	1.67%
The Voivodeship of Sub-Carpathia	1.33%	1.31%	0.94%	1.05%	1.05%	0.93%
The Voivodeship of Podlassia	1.13%	1.21%	0.93%	1.02%	0.85%	1.10%
The Voivodeship of Pomerania	7.24%	5.82%	5.12%	5.22%	5.15%	4.17%
he Voivodeship of Silesia	6.92%	6.76%	6.50%	6.30%	6.24%	5.59%
The Voivodeship of Kielce	0.40%	0.31%	0.47%	0.39%	0.34%	0.54%
The Voivodeship of Varmia and Masuria	1.41%	1.04%	1.42%	1.46%	1.28%	1.33%
The Voivodeship of Greater Poland	5.60%	4.06%	4.32%	4.27%	5.36%	6.91%
The Voivodeship of Western Pomerania	5.40%	4.98%	5.61%	5.24%	4.82%	5.13%
TOTAL	100%	100%	100%	100%	100%	100%

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2015 – 2020

Among the cities, where dwellings were the most willingly bought by foreigners, Warsaw was the most popular. In 2020, foreigners purchased 1 704 flats in the capital of Poland, accounting for 22.92% of all purchased premises, which meant an increase by 2.31 pp compared to 2019 and as much as 5.25 pp compared to 2018. The second place was continuously occupied by Kraków, where in 2020 977 dwellings were purchased by foreigners, accounting for 13.14% of all sale transactions. Third place was taken by Wroclaw, where the number of apartments purchased by foreigners amounted to 787, which constituted as much as 10.59% of all transactions. Growing interest among foreign buyers in dwellings located in Lodz can be observed – the share of transactions on the Lodz residential market in 2020 has tripled since 2015 – from 99 to 323 premises, while compared to 2019 the increase in the number of flats purchased by foreigners accounted for 23.28%. The greatest decrease in activity was recorded in Gdansk – by 43% compared to the previous year.

TABLE 4. NUMBER OF ENTRIES TO REGISTERS REGARDING DWELLINGS PURCHASED BY FOREIGNERS ON THE BASIS OF PERMITS AND WITHOUT OBLIGATION TO OBTAIN THE PERMISSION ACCORDING TO CITY IN WHICH DWELLING IS SITUATED IN 2015 – 2020

City	2015	2016	2017	2018	2019	2020
Gdansk	2.74%	2.84%	2.72%	2.64%	2.90%	1.86%
Gdynia	1.09%	1.03%	0.81%	0.92%	0.68%	0.51%
Gorzow Wielkopolski	0.51%	0.30%	0.48%	0.70%	0.55%	0.96%
Cracow	12.60%	14.97%	15.24%	13.76%	13.68%	13.14%
Lodz	2.64%	2.13%	2.53%	2.24%	3.09%	4.34%
Poznan	3.94%	2.65%	2.70%	2.73%	2.63%	2.78%
Szczecin	1.86%	1.48%	1.82%	1.66%	1.37%	1.21%
Swinoujscie	0.93%	0.90%	1.04%	0.85%	0.87%	0.94%
Warsaw	26.80%	27.02%	25.16%	28.17%	25.23%	22.92%
Wroclaw	7.35%	10.52%	9.93%	10.85%	9.31%	10.59%
Zakopane	0.27%	0.28%	0.29%	0.09%	0.09%	0.03%
other	39.26%	35.86%	37.29%	35.40%	39.60%	40.72%
TOTAL	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%

source: self-study based on the report of Ministry of the Interior and Administration (MSWiA) on execution of the act on real estate acquisition by foreigners in 2015 – 2020

In the last five years, significant changes have been observed on the market of residential and commercial premises purchased by foreigners. The growing number of foreign nationals in Poland will determine the growing number of residential property transactions concluded by foreigners. Furthermore, the prices of dwellings on the Polish market, despite the growth in recent years, are still lower than in Western European countries, which makes them an attractive capital investment for investors. According to data from the SARFiN System, a total of 124 185 housing loans were granted in the first half of 2021 and amounted for PLN 40.079 billion and if current trends continue, record results are expected by the end of this year. The publication of the MSWiA Report on real estate acquisition by foreigners in 2021 will verify if the expected record increase in dwellings’ sales will also apply to foreigners and to what extent this market segment will be affected by the COVID-19 pandemic in 2021.

Marta Polkowska
SARFiN System Data Administrator
Senior Maintenance and Development Specialist

Recent quarters have brought dynamic changes in European economies. COVID-19 pandemic and restrictions imposed in its consequence, as well as activities aimed at counteracting their negative effects, have had a significant impact on the housing markets of European cities, changing not only the level of prices, but also rents. Therefore, we decided to review prices and rent levels in capitals of EU countries.

The analysis covers prices and rent rates of apartments of the floor area ranging from ​​45 to 55 square meters, of an average standard, located outside strict city centres. The rent rates are considered net rents, excluding administrative fees. It should be noted that due to the vide scope of the topic and, at the same time, limited volume of this elaboration, this analysis does not take into account all the differences and conditions on individual markets, including the issues related to administrative regulations of rents or differences in the standard of buildings, providing only a simple statement of values ​​for particular locations. Two capitals, Valetta (the capital of Malta) and Nicosia (the capital of Cyprus), were not included in the list, due to lack of available data.

The analysis is based on data from both websites of official statistics (Eurostat, ec.europa.eu) and websites devoted to the quality of life (numbeo.com) and real estate residential market in individual countries.

Among the EU countries capitals, Paris is the unquestionable leader in terms of the level of housing prices. The average price of 1 square meter of an exemplary apartment in French capital equals to PLN 43 426. Slightly lower, although still very high prices are paid in Luxembourg – PLN 37 460 and Stockholm, where the transaction prices equalled to PLN 26 190. Meanwhile, the lowest prices were recorded in Riga, Bucharest and Sofia – respectively PLN 5 790, PLN 5 200 and PLN 5 015 per square meter. Thus, a nearly nine times difference in the price of 1 sqm of a flat was recorded between the most expensive and the cheapest capital city in the European Union.

The level of housing prices also shows a clear division of the continent. Apart from Paris, which due to the specific location advantages and the disproportionately high demand for real estate from foreigners, somewhat evades the rules, the highest housing prices were recorded in the capitals of northern European countries – Scandinavian countries, Germany, the Netherlands and Ireland. Slightly lower prices are observed in the southern EU countries and in the region of Central Europe, while the cheapest apartments can be purchased in the capitals of South-East Europe and in the Baltic states. Out of 25 surveyed capitals, Warsaw occupies 17th place in this ranking. The average price per square meter of the model apartment in Polish capital was PLN 11 600. Thus, Warsaw turned out to be more expensive than Budapest, Zagreb and Athens, where average prices were recorded at the level of respectively PLN 9 140, ​​PLN 8 870 and PLN 7 730. Among the capitals of the Central and Eastern Europe region, prices clearly higher than in Warsaw are noted in Prague and Bratislava. The average price of the square meter of a flat in the Czech capital was PLN 17 096 (more than in Rome or Brussels), and in the capital of Slovakia – PLN 12 362.

CHART 1. AVERAGE PRICES OF 1 SQM OF A MODEL FLAT IN CAPITALS OF 25 EU COUNTRIES (EQUIVALENT IN PLN)

source: AMRON Centre own study

For understandable reasons, the most expensive capital of the European Union – Paris – occupies the last place in comparison of price availability of flats, expressed as the proportion of the price of a square meter of a flat and the average net income recorded in particular cities. For an average monthly salary, a Parisian can buy only 0.30 square meters of a flat. Interestingly, only a slightly larger area can be afforded by a resident of Prague, occupying the penultimate place in the ranking (0.34 sqm) or Lisbon – 0.38 sqm. It seems that in case of both these cities, as in case of Paris, the reasons for this phenomenon should be found primarily in their attractiveness.

Inhabitants of the capital of Ireland are in the best situation in this respect. Monthly salary allows them to buy 0.75 sqm of an apartment. Sofia in on the second place in this ranking with 0.7 sqm. However, while in case of Dublin such a result is dictated primarily by the average wage (over EUR 2 500), in case of Sofia it is rather relatively affordable level of housing prices. Warsaw, with 0.46 sqm, is on 18. position, with accessibility comparable to Luxembourg and Athens (in both cases also 0.46 sqm) and slightly higher than in Ljubljana, Rome and Budapest (0.44, 0.44 and 0.42 sqm, respectively).

CHART 2. HOUSING ACCESSIBILITY IN CAPITALS OF 25 EU COUNTRIES

source: AMRON Centre own study

The situation is slightly different in terms of rent rates of flats. The highest rent rate for a model flat among the analysed European capitals was again recorded in the capital of Ireland. The average monthly fees amounted there to PLN 6 440. The residents of Amsterdam and Luxembourg pay slightly lower, although still high rent rates (PLN 5 736 and PLN 5 639, respectively). The lowest average rent rates level was recorded in Riga (PLN 1 396), Bucharest (PLN 1 287) and Sofia (PLN 1 255). Warsaw with an average rent of PLN 2 436 was placed on the list between Lisbon, where the average rent rate for the analysed flat equalled to PLN 2 937 and Prague (PLN 2 385). The average rent rate recorded in Warsaw was the highest among all capitals of the former Eastern Bloc countries (obviously except for Berlin, where the average rent rate equalled to PLN 3 061).

CHART 3. AVERAGE RENT RATES OF A MODEL APARTMENT IN CAPITALS OF 25 EU COUNTRIES (EQUIVALENT IN PLN)

source: AMRON Centre own study

The comparison of rental availability (understood for the purposes of this analysis as the proportion of average rent and average net income) shows that residents of Berlin spend proportionally the least on renting a model apartment, compared to other analysed cities. The average rent rate for the surveyed type of apartment in German capital is only 24.1% of local average net income. The inhabitants of Brussels (28.1%) and Vienna (29.4%) are also in a good situation. However, the citizens of Lisbon are at the opposite side. The rent rate for a model apartment In Portuguese capital accounts for as much as 55.6% of the average net income. Rental availability of flats is slightly higher in Dublin (49.7% of the average net income) and Rome (47%). Unfortunately, the capital of Poland is ranked high, on 5. position, being only slightly overtaken by Athens (46.1%). The average tenant of a model flat in Warsaw spends 46% of his monthly income on rent. This is again the highest result recorded in the region.

CHART 4. RENT AVAILABILITY IN CAPITALS OF 25 EU COUNTRIES (MODEL FLAT)

source: AMRON Centre own study

Interesting conclusions can also be drawn from the analysis of simple rates of return on investment in a model flat for rent in individual European capitals (in an annual period). Once again, Dublin is the leader of the ranking with the simple rate of return exceeding 8.8%. This is mainly due to the high level of rent rates recorded in the capital of Ireland. By contrast, the lowest rate of return was recorded in Paris (only 2.2%), which in turn results from high housing prices. The rates of return for the other researched locations ranged from 6% for Sofia to 3.3% for the Czech capital. Warsaw, where the rate of return, despite the decline in rents caused by the COVID-19 pandemic, equalled to 5%, took 11. place in the ranking and was overtaken by, among others, Madrid, Athens and Copenhagen, where the rate of return was recorded at the same level of 5.2%. Similar values of return rates to that recorded in Warsaw were also recorded in Tallinn (5%) and Rome (4.9%).

CHART 5. RATE OF RETURN ON INVESTMENT IN MODEL APARTMENT FOR RENT IN ANNUAL PERIOD IN CAPITALS OF 25 EU COUNTRIES

source: AMRON Centre own study

Jerzy Ptaszyński
Research and Market Service Director

Public consultations on the draft Act on investments in the field of drought prevention dated August 12, 2020 are completed. The comprehensive draft act prepared by Ministry of Maritime Economy and Inland Navigation resulted from work of the inter-ministerial team dealing with drought in Poland and was consulted in all voivodeships under the ‘Stop Drought Program’. According to the justification, the amendments are intended to ‘(…) introduce solutions to the legal system that will simplify and accelerate work related to preparation for implementation of retention projects aimed at reducing consequences of drought in Poland’. The draft is another so-called special act, in this case the special drought act, including a package of solutions, which according to the legislator: ‘(…) will facilitate water retention and improve the availability of water resources in Poland in order to mitigate the negative effects of prolonged periods of drought’.

The draft provides for an amendment to, inter alia, the Water Law of July 20, 2017, regulating the currently applicable rules for calculating the so-called ‘rain tax’.

In Poland, the ‘rain tax’, also known as the ‘concrete tax’, has been applicable since January 2018 as a fee for reduction of natural field retention as a consequence of works or construction objects permanently connected with land on real estate with an area of more than 3500 sqm, which reduce this retention by excluding more than 70 percent of the real estate area from the biologically-active surface in areas deprived of sink or sewage systems. In accordance with the current legal order, real estate must fulfil three conditions to be subject to the ‘rain tax’:

• the surface area of the real estate must exceed 3500 sqm,
• real estate must be developed in such a way that more than 70 percent of its surface is excluded from biologically-active area,
• real estate must be located in areas deprived of sewage systems.

Currently, the tax is not widely known, especially among the owners of plots of land developed with single-family housing, due to the area and development ratio. Parameters defined in this way mean that mainly owners of commercial buildings, industrial buildings and storage facilities are obliged to submit the fee.

Draft amendment provides for tightening of these requirements. When changes come into forces, the obligation to pay the fee will apply also to owners of real estate with an area of more than 600 sqm, which are built-up in more than 50 percent. The third criterion will no longer be applicable. As a result, according to the estimations of the project’s authors, the number of plots subject to the ‘rain tax’ will increase approximately 20 times. An increase in the tax amounts is also expected. So far, in accordance with the Water Law Act tax rates have been calculated as follows:

• in case of plots without water retention devices from sealed surfaces permanently connected to the ground – PLN 1.00 per year for 1 sqm,
• in case of plots with devices for water retention from sealed surfaces with a capacity of up to 10 percent of the annual runoff from sealed surfaces permanently connected to the ground – PLN 0.60 per year for 1 sqm,
• in case of plots with devices for water retention from sealed surfaces with a capacity of 10 to 30 percent of the annual runoff from sealed surfaces permanently connected to the ground – PLN 0.30 per year for 1 sqm,
• in case of plots with devices for water retention from sealed surfaces with a capacity of over 30 percent of the annual runoff from sealed surfaces permanently connected to the ground – PLN 0.10 per year for 1 sqm.

After the amendments come into force, the upper tax rates will be:

• PLN 1.50 per year for 1 sqm, in case of plots without water retention devices from sealed surfaces permanently connected to the ground,
• PLN 0.90 per year for 1 sqm, in case of plots with devices for water retention from sealed surfaces with a capacity of up to 10 percent of the annual runoff from sealed surfaces permanently connected to the ground,
• PLN 0.45 per year for 1 sqm, in case of plots with devices for water retention from sealed surfaces with a capacity of 10 to 30 percent of the annual runoff from sealed surfaces permanently connected to the ground.

The charge depends on the area of the developed land excluded from biologically active surface and use of retention compensation, i.e. the more retention infrastructure on the property or the higher efficiency of this infrastructure, the lower the fee will be. The aim of the tax growth is to encourage property owners to increase the amount of water retained on properties, as well as to maintain the highest possible share of biologically active area, which in a broader context is to contribute to reorientation of Polish cities development from concrete to urban greenery. According to the legislator’s intention : ‘(…) The measures to increase the retention will also improve safety level by more effective flood prevention arising from intensive rainfall, which, apart from droughts, are a consequence of climate changes’.

In accordance with current legislation, fee for reduction of natural field retention is not charged for public roads and railways, if rainwater or snowmelt are drained into waters or into the ground by water devices enabling retention or infiltration of these waters. Churches and other religious associations are also exempted from this fee. When new regulations come into force, also agricultural land will be excluded from the ‘rain tax’ payment obligation.

The act will introduce a change in distribution of the collected funds: 75% of the tax revenue will be allocated to State Water Holding Polish Waters and 25% to the budget of the relevant commune, with a minimum of 80% of this income earmarked to the development of rainwater retention in the catchment area of the commune. The legislator proposes an increase in revenues for communes, as the rainwater management is the communes own task. Growth in the amount of revenues from current 10% to 25% is to increase retention as a result of the activities of municipalities that will receive an additional source of financing.

According to data from the Institute of Meteorology and Water Management, Poland is one of the least water-rich countries in Europe. The average annual surface water runoff per capita is 1600 cubic meters, which is almost three times lower than the European average. Recently, periods of water deficit alternate with periods of elevated levels of water in rivers caused by heavy rainfall, therefore taking measures aimed at reducing negative effects caused by extreme weather events by enhancing the retention is assessed positively. However, it is unfortunate that instead of introducing tax reliefs for property owners depending on the unsealed area, ponds or the number of plantings, the legislator introduces another fee. Nevertheless, Poland is not a precursor in this area – similar charges are already present in other countries, such as the United States or Germany.

The final date of entry into force of amendments to the Act on investments in the field of drought prevention is still uncertain, but according to the legislator announcements January 1, 2022 is expected to be that date.

Judyta Konopka
Project management specialist

The COVID-19 pandemic has left its mark on the construction industry. The global situation has affected the speed of land purchase decisions and increased interest in building homes. The popularity of single-family houses is constantly growing, and this trend is strongly reinforced by fears of further pandemic waves and the imposition of remote working as a standard operating model. More and more people appreciate the opportunity to own their own home with a garden or recreational plot.

Factors influencing the prices of building plots are primarily:

• location,
• shape and size,
• availability of access road,
• access to utilities,
• plot environment and development conditions,
• soil quality.

CHART 1. AVERAGE OFFER PRICES OF BUILDING PLOTS BY PROVINCES

source: own elaboration based on data from otodom.pl

The first half of 2021 revealed a significant increase in the offer prices of building plots in almost all provinces. The largest increases could be observed in Lower Silesian Voivodeship, where prices increased by 28% compared to 2020, and in Podlaskie Voivodeship, where prices increased by almost 32%. There was also a significant upward trend in the Warmian-Masurian Voivodeship (↑26%), as well as in the Greater Poland Voivodeship (↑27%). The only voivodeship, where a decrease was observed, was the Subcarpathian Voivodeship (↓12%), while in the Lodz Voivodeship prices remained stable.

In June 2021 the highest offer prices were in Masovian Voivodeship. The average price per sqm of land amounted to PLN 232. The second position was taken by Pomerania, where the average offer price for a building plot was PLN 190 per sqm. The last place was occupied by Malopolska Voivodeship with the average price of PLN 171 per sqm. Land for building development reached the lowest prices in the following voivodeships: Subcarpathian (PLN 74 per sqm), Lubusz (PLN 85 per sqm), Warmian-Masurian (PLN 91 per sqm), Opole (PLN 92 per sqm) and Kuyavian-Pomeranian (PLN 93 per sqm).

Data from the Central Statistical Office (GUS) shows that in the first half of 2021, the construction of more than 54 thousand single-family homes began. This was a 22% higher result compared to the same period in 2020. From January to June 2021, more than 60 thousand building permits for single-family homes were issued to individual investors, which is almost 29% more than in the first half of 2020. Last year, 101 600 permits were issued, which was 5 percent more compared to 2019.

CHART 2. RATE OF INTEREST IN THE PURCHASE OF APARTMENTS AND SINGLE-FAMILY HOUSES

source: own elaboration based on data from nieruchomosci-online.pl

Analysing the results of interest in purchasing particular types of property, it can be seen that the popularity of dwellings is declining in favour of an increase in interest in single-family houses.

Currently we observe a significant decrease in the number of advertisements. In all the voivodeships the number of land offers is falling. The largest decrease was noted in Podlaskie Voivodeship (↓24%), Pomeranian Voivodeship (↓23%), West Pomeranian Voivodeship and Silesian Voivodeship (↓21%). The exception is the Subcarpathian Voivodeship, where the number of announcements at the end of the second quarter increased by 4 percent. Decreasing supply of advertisements has a significant impact on the increase of prices of undeveloped land. The highest increase was noted in Kosakowo (Pomeranian Voivodeship), where the offer prices of plots increased by 20 percent compared to the first quarter and by 35 percent over the last six months.

Over the past year, a constant increase in land prices can be observed. The growing demand for undeveloped land properties is undoubtedly impacted by low interest rates. Another factor which influences the popularity of plots is the rising inflation rate. Poles are willing to invest their savings in real estate. Additionally, the increase in prices of undeveloped land is constantly driven by the rising prices of apartments and houses. According to real estate analysts, people who are planning to buy a plot of land should hurry up with their decision, because probably in 5 years the prices may strongly increase.

Dominika Gocalińska
Customer Relations Specialist

On May 20, 2021, the Parliament passed an act on the protection of rights of buyers of residential premises or single-family homes and on a Developer Guarantee Fund prepared by the President of the Office of Competition and Consumer Protection. This is an amendment to so-called Development Act which came into force on April 29, 2012.

New regulations introduce a number of changes aimed, among others, at improving the security of legal transactions of real estate and eliminating the risk of loss of payments to escrow accounts by purchasers of new apartments. In addition, the Act defines new rules, as well as procedure and content of concluding a developer agreement and other agreements concluded between the buyer and the developer aimed at transferring the property ownership right, as well as rights and obligations of the parties to the above-mentioned documents. The key change is the establishment of a Developer Guarantee Fund, the purpose of which is to increase the protection of people buying apartments from the primary market in case of bankruptcy of a developer company.

The Act imposes an obligation on the developer to provide the property buyer with the construction documentation, schedule of works, information prospectus and documentation of the developers’ legal and financial situation before concluding the agreement.

The amendment introduces a maximum reservation fee of 1% of the value of the property specified in the prospectus for the preliminary contract for premises (reservation agreement). Currently, each developer decide on the amount of the aforementioned fee. The amount paid by the customer is credited against the value of the apartment once the developer agreement is signed. If customer does not get a mortgage loan, the reservation fee will be refunded, but if buyer resigns of the property purchase, the amount paid will be lost. In case it is the developer that withdraws from the signed reservation agreement, the customer will receive the double amount previously paid.

The Act obliges the developer to provide an information prospectus to the apartment buyer and defines what information it should contain. Previously, such a prospectus was available at the request of a person interested in concluding a developer agreement. In the event of irregularities or deficiencies in the agreement or the prospectus, the purchaser will have the right to withdraw from the contract.

The new regulations will enable real estate buyers to withdraw from the agreement in case of significant defects of the subject of the contract discovered both during the transfer of the property and those that became apparent after signing of the property handover protocol until the date of transferring the ownership title to the real estate.

The procedure of commissioning the real estate has been clarified, together with consequences of failure to remove defects within the time limit set by the buyer. In matters of dispute, the purchaser of the property may request an opinion of a building surveyor to confirm the existence of defects. A novelty is the possibility for the buyer to withdraw from the agreement in the event of failure to transfer the ownership right to the buyer on time.

In compliance with the provisions of the Act, Developer Guarantee Fund (DGF) will be established to provide financial protection to apartment buyers in the event of bankruptcy of a developer or a bank. The tasks of the DGF will include collecting data on investments, developers, banks running escrow accounts and buyers, as well as accepting payment contributions from developers. Furthermore, DFG will be responsible for payment of due benefits to purchasers and pursuing claims against the developer or bank for reimbursement of funds paid to the purchaser.

Under the current regulations, real estate developers are obliged to collect payments from apartment buyers in banks at closed or open escrow accounts. In case of closed accounts, the bank disburses the accumulated funds to the developer after the property is transferred to the buyer. Open accounts, which are prevalent on the market, allow funds to be gradually transferred to developers in tranches according to the progress of the development project. If the developer goes bankrupt, this puts the buyer at risk of losing both the funds and the property.

The Act introduces the bank’s obligation to verify whether the developer is not in arrears with taxes, social security contributions, payments to contractors and subcontractors, as well as to check whether the DGF contributions are paid in the right amount before transferring the money from the escrow accounts to the developer. In case of financial trouble or bankruptcy of the developer company, the funds transferred by the bank will be secured in the Developer Guarantee Fund, from which in emergency situations the funds paid for the purchase of the apartment by the buyer will be returned. Moreover, in case of bankruptcy, the DGF will pay out money above the amount guaranteed by the Bank Guarantee Fund.

The Developer Guarantee Fund will be financed by contributions paid by developers to secure the money paid in by the customers. The amount of the rates will be determined by the minister competent for construction, planning and spatial development and housing, and their maximum amount shall not exceed 1% for an open escrow account or 0.1% for a closed escrow account.

Regulations introduced by the Act are to ensure security of legal transactions in real estate and to eliminate the risk of purchasers’ financial loss . The proposed solutions will oblige not only developers to incur additional costs, connected with paying contributions to DGF, but also banks, which will be obliged, among others, to invest in new IT systems compliant with the Act requirements. The costs of the real estate industry and the banking sector associated with the implementation of the Act’s provisions may be consequently passed on to buyers through an increase in property prices and mortgage loan costs.

Currently, the amendment is awaiting the President’s signature. The regulations will be effective 12 months after publication in the Journal of Laws, except for some articles which will enter into force on other dates. The application of the regulations in practice will verify whether the introduced changes significantly influence the safety of real estate trading and increase of prices on housing market.

 

Marta Polkowska
SARFiN System Data Administrator
Senior Maintenance and Development Specialist

During the press conference on fundamentals of the Polish Deal programme, the planned changes in legal aspects of single-family construction process were presented. New provisions were inspired by previously introduced solutions concerning construction of a small recreation house and provide construction of a single-family house of a covered area not exceeding 70 sqm. based only on a notification. Building permit, site manager and a construction logbook will not be required any more, which will shorten the whole construction process and limit the investor’s costs. However, it must be remembered that the assumptions of a Polish Deal programme are described in a document with no legal force, which, if accepted, will be translated into acts and ordinances drawn up by the Council of Ministers and their final shape may significantly differ from assumptions already presented.

EXAMPLARY DESIGN OF A SINGLE-FAMILY HOUSE OF A COVERED AREA UP TO 70 SQM

source: extradom.pl

Differences between building permit and a notification

At present, construction of a single-family house based only on notification is legally allowed, but in practice only approx. 1% of all construction investments are conducted that way, as the process of obtaining all administrative agreements is very rigorous and in fact only slightly differ from the process including building permit. Since last year, neither building permit, nor a site manager and a construction logbook is applicable in case of construction of a recreation house or utility building of a covered area not exceeding 35 sqm – it requires only a notification.

The greatest difference in construction under notification compared to construction under building permit relates to the date, when construction works may begin. Building permit is issued within 65 days from the date of the application and then it takes 14 days until the permit becomes final. If the application is incomplete and requires some supplementary documents, the new date is appointed by the permitting authority. Construction under a notification is much faster procedure. If the investor receives no objection within 21 days from the date of submitting a notification, the tacit consent is assumed, which means that the construction works may start immediately.

Construction of a house up to 70 sqm – preliminary assumptions

Construction under a notification does not relieve investor from obligations resulting from the applicable provisions, which include such objectives, as:

• the total usable floor area must not exceed 90 sqm on two storeys;
• one house per every 1000 sqm of a plot;
• the house must be situated 3-4 meters from the plot’s border, depending on whether the wall has or doesn’t have windows and doors and whether there are buildings on the neighbouring plot;
• the investment must be compatible with local spatial plans or development conditions, in accordance with the procedure of a notification with the architectural design.

Simplified procedures will not allow the land use violations by constructing illegal buildings or constructing many buildings on a small plot. Procedure of construction under a notification is planned to be regulated and controlled by the District Construction Supervision Inspectorate (PINB). A notification, compared to building permit, is shorter and less complicated procedure. A notification must be submitted before the date of planned start of construction works. If construction works start with no notification or before the period, when the permitting authority is obliged to process the notification, the building will be considered as illegal and legalization procedure will have to be conducted.

In purpose to simplify the whole procedure, the government plans to provide future investors with the catalogue of free architectural designs of single-family houses of a covered area not exceeding 70 sqm, which will include description of the installations and other necessary facilities.

Changes proposed in the Polish Deal programme may be considered positive by future investors, but they were found alarming by experts, e.g. in terms of proper quality or safety supervision. Houses built under a notification, with no site manager and no construction logbook, will have to comply with certain technical conditions – it will be a responsibility of an investor. The question without answer is also responsibility for consequences of possible defects of workmanship or for construction disaster. Another question refers to information normally included in construction logbook, such as documentation of surveying works, verification of natural ground base for the building’s foundations, confirmation of construction of a safe building, consistent with the architectural design. In experts’ opinion, savings on site manager may result in redundant complications and finally extension of the construction process.

Costs of construction of a house up to 70 sqm

After introducing changes announced in Polish Deal programme, the demand for small single-family houses may increase and therefore construction costs may also increase. At present, cost of finishing the building shell of a house up to 70 sqm ranges from PLN 100 to 2000 thousand. The final cost is obviously influenced by individual preferences of an investor and the complexity of a design. Price of a plot, as well as costs of site connection to the utility networks should also be taken into account. Increases in construction costs related to growing prices of building materials or inflation are already observed. However, despite possible costs increases, construction of a small house may turn out to be an interesting alternative for purchase of a flat in multi-family building, as prices of flats are already very high.

Klaudia Jastrzębska
AMRON III Development Senior Specialist, GIS Analyst

As of July 1, 2021, you no longer need to leave your home to apply for a construction permit. Via e-budownictwo.gunb.gov.pl website you may submit 23 applications related to the construction process. As the Ministry of Development, Labour and Technology (MRPiT) emphasises that this website will be a tool that simplifies and reduces the time of the construction process.

About website

The e-Budownictwo portal (e-budownictwo.gunb.gov.pl) is an official government website, where you can fill and submit documents related to the construction process. These documents are then sent online to the relevant office, which will process the application. It was launched in August of 2020. At the beginning 10 forms were posted. Now there are 23 forms and the website is still being developed. The General Office of Building Control is responsible for the management of this website. The main platform users are investors, engineers and architects. Since the day of its release, e-Budownictwo has been visited by 31,000 users and displayed about 200,000 times.

What can we do online?

The website enables citizens and investors to fill and file online applications related to the construction process. Since July 2021, the following forms are available on the website:

• a statement about the right to use the property for construction purposes,
• application for legalization of a construction object,
• application for derogation from technical and construction regulations,
• a building licence application with enclosed the plot development project or construction project,
• application for a demolition permit,
• application for a building use permit,
• application for the transfer of the building permit decision,
• application for the transfer of the permission to resume construction works,
• application for the transfer of rights and obligations arising from the notification,
• application for the preparation of a spatial development plan or a change in the spatial development plan,
• application for the initiation of a simplified legalization procedure,
• application for a decision on the necessity to enter an adjacent building, premises or the area of a neighbouring property,
• application for on the exclusion of certain obligations of the site manager,
• application for a separate decision to approve the plot development project or construction project,
• a building licence application for a temporary construction object,
• application for a change of the building licence,
• notification of completion of construction,
• notification of the intended date of start of construction works,
• notification of construction works,
• notification of demolition,
• notification of a change in the use of a construction object or its part.

HOW TO SUBMIT AN APPLICATION?

To use e-budownictwo website, you need to create an account. You can use a website without registration with a trusted profile (profil zaufany). After logging in, you will get access to your draft and sent version of your application. If you want to create a new application, press the button “+UTWÓRZ WNIOSEK”. When you choose a particular application, the application wizard will pop up. In the first step, you add the data about the investor. The next step is to insert data about your real estate. You can fill forms manually or using a map. The location of the investment can be found by using the address or clicking on the map within the plot. In the next step, we fill in the information related to a given type of application’s form. In the end, we add attachments.

When you fill in all fields, you have to download a file and save it on your disk. If you need to send the application to the office, please select “Go to GOV.PL” (“Przejdź na GOV.PL”). By ePUAP website, you can send a letter. You can log in to this website by using a trusted profile (profil zaufany) or e-ID. In the displayed window, please select the office or institution appropriate for the investment’s location, indicate the type of letter application and add a message to the office. In the text file, you can add a note that the letter is addressed to the architecture and construction administration department or construction supervision. By doing this, processing time of your application can be shortened. The attachment’s section requires a file with the application from e-budownictwo website. It is obligatory. Without this file the office cannot process the request. When you confirm the correctness of your letter, in the next step you have to sign a document. 3 forms of e-signature can be used:

• qualified electronic signature (QES)
• a trusted profile (profil zaufany)
• e-ID

After signing the document, official certification/proof of submission is sent to the electronic inbox. The date of receipt of the application by the office is equal to the date of receipt of the letter in the office’s inbox. If you add an address to your ePUAP inbox, the office will contact with you online.

BENEFITS OF THE SERVICE

An amendment to building law enabled the digitalization of the construction process. E-budownictwo portal is for all of those who prefer to handle official documents online, without leaving the house. By this, we reduce visits to the office and do not have to stay in the queue. At the same time it is supposed to reduce the processing time of the application. Communication between office workers and investors is also easier. It reduced the waste of paper. The store of documents for offices and investors was always a problem. As we know, the number of documents in the construction process is high. At the same time, it is still possible to submit an application in a traditional way in the office. About the way of submitting an application decides investors.

Agnieszka Bartoszewska
Real Estate Market Analyst

Spatial order is a broad and general concept that has a significant impact on public spaces. In addition, it is a subjective and relative concept, so it is difficult to have a universal definition of it. In the context of this article, spatial order will be understood as a multidimensional way of shaping space, the main goal of which is to achieve harmony, legibility and proportionality. Its formation should take into account social, economic, natural and cultural needs. The space, which is shaped with spatial order in mind, is tidy, of high compositional and aesthetic values, and the objects are situated in accordance with their nature and functions they are to perform.

The characteristics of a space designed according to spatial order are most often defined as:

• the harmonious arrangement of space and the presence of hierarchy in a particular arrangement of elements,
• the balance of individual components in the organisation of space and the purposeful distribution of functions (intentionality),
• the best use of space aiming to meet human needs in the most effective way (efficiency),
• associating the interest of the individual with the general good and coordinating development with higher-level needs (coordination),
• compatibility of the transformations with the environmental conditions and lack of collision of functions and spatial conflicts (conflict-free and sustainable development).

To make it easier to understand the defined term, specialists have ‘broken down’ spatial order into its constituent elements:

The first element is the urban and architectural order, which is directly related to the spatial structure, the arrangement of elements (e.g. green areas, small architecture), their size, shape and location, as well as the legibility of the structure. The second element is social order, which is a resultant of the formed networks of social relations, their durability, identification with a place, as well as aspects related to the sense of security. There is also functional order resulting from the coexistence of various functions and relations between them, saturation with social infrastructure and other utility values. Important for residents, as well as tourists and investors, determining the attractiveness of the place is also the aesthetic order, which refers to the beauty of the place, neatness and sense of order, as well as the presence of dominants improving the legibility of this space. The last one is the ecological order, having to do with the value and condition of the natural environment, nature protection, which in turn translates into the quality of life of the inhabitants, thus influencing the social order. Urban planners and architects most often understand spatial order in terms of ‘composition and aesthetics’, but spatial order is an interdisciplinary concept and should be considered more broadly, going beyond the above-mentioned point of view to include economics, politics, history and environmental protection.

It should also be borne in mind that the use of terms ‘spatial order’ and ‘spatial aesthetics’ interchangeably is incorrect, as spatial order is a broader and deeper concept. The depth of this term lies in the fact that spatial order, in addition to satisfying the basic physical needs of humans in the environment, is also aimed at satisfying spiritual and psychological needs, i.e., among others, the need for identification with a given environment or a sense of security. Spatial order should be treated comprehensively, and one of its elements is aesthetics.

The condition of spatial order in Poland

In Polish legislation, the phrase ‘spatial order’ was used for the first time in 1994 in the Act on Spatial Development. The official definition, which was introduced to the Act on spatial planning and development of 2003, states that spatial order ’is such a configuration of space, which creates a harmonious whole and takes into account all functional, socio-economic, environmental, cultural, compositional and aesthetic conditions and requirements in orderly relations’. In spatial planning, aspects related to respecting spatial order are required by law. The fact is that it is municipality that is responsible for this planning, which therefore should be equipped with competences and is responsible for the implementation of the spatial order, mainly through reliable and well thought-out Local Spatial Development Plans and the Study of Conditions and Directions of Spatial Development.

It is not a secret that the Polish space has unfortunately little to do with spatial order, and its condition is hardly satisfactory. The biggest problems of space in Poland include its lack of context, diversity in the bad sense of the word, disorder and lack of consistency. The problem is increasingly recognized by the public and discussions are being held about it. There are situations in which architects and urban planners succumb to fashion and investors, allowing for the so-called point architecture, i.e. architecture that does not fit into the surroundings and is out of context with the existing buildings. One of the reasons for this is the lack of planning concepts and people in charge. However, it cannot be said that every space in Poland is in bad condition, there are fragmentary positive examples on the scale of the city or its districts, but they are too rare to explicitly acknowledge the spatial order in Poland exists. On the other hand, if we focus on spatial order on a national, provincial or even municipal scale, we have to admit that it remains so far only an ambition.

PHOTO. 1. SPATIAL CHAOS IN POLAND ON THE EXAMPLE OF WARSAW

source: https://businessinsider.com.pl/ (access: 2021-06-16)

There are many reasons for this. The first and most frequently mentioned is the low architectural awareness and low aesthetic culture in the context of the surrounding space of Polish society. The possibilities are great, but inappropriate use of them is the cause of spatial chaos, and developing architectural and aesthetic taste is a long process, especially since this subject is discussed almost exclusively at art schools.

The literature divides the factors considered to be the cause of spatial disorder. These are legal and social reasons. Legal reasons include factors such as:

• lack of enforcement capacity,
• legislative gaps,
• lack of spatial concepts,
• low number of adopted local spatial development plans and their low precision.

It happens quite often that the only “impassable” provisions are such elements as the impassable building line or the maximum percentage of biologically active area. Such parameters as the type of materials used, the height of the development, the colour scheme or the manner of introducing greenery are defined in a very general way, as a result of which the investors have a lot of freedom in making deviations from construction projects. Moreover, in Poland the concept of the superiority of private interest over public interest is extremely ingrained, and consequently space is perceived only within the framework of one’s own property, which makes it difficult to convince e.g. investors to apply solutions compliant with spatial order, as they hide behind the right to the property. An important legal factor is the lack of a provision on spatial order in the Constitution, which is very often the case in Western European countries.

Social causes are:

• lack of financial resources,
• low social culture (e.g. belief in the primacy of private over public interest),
• low aesthetic culture,
• the current condition of the space (lack of role models),
• the desire to break away from the architecture of the People’s Republic of Poland, which resulted in a great variety of architectural forms, saturation with ornaments and kitschiness.

Spatial disorder is often the result of a combination of a bad situation and considerable socio-economic contrasts, together with corruption and the impotence of the law. Spatial chaos unfortunately leads to the death of the human friendly and comfortable city.

Recently in the Polish public space we can observe a phenomenon called ‘aestheticization’. In the simplest terms, these are activities strongly related to heritage and identity, aimed at improving the physiognomy of the city, increasing its aesthetic value. This is an arduous and difficult process, as it often requires a change in the attitude and thinking of the inhabitants, moreover in some cases also the identity of the city or the neighbourhood. These are usually actions involving the protection of historical monuments, aestheticization of the city background through the introduction of such elements as vegetation, small architecture, works of art, but respecting the spatial order and the principle of space cohesion. Such processes are important because through them the structure and urban space can be transformed. An example that did not quite fulfil the role of aestheticization is the open city gallery (Galeria Murrr), which was opened in Praga Północ (Warsaw) on the walls of the Frito Lay factory, where the foundation “Bęc Zmiana” decided to extract some colour and life from this space by allowing the presentation of modern large-format works. As a result, various artists placed their works of art on the wall in various themes.

PHOTO 2. GALERIA MURRR IN PRAGA PÓŁNOC, WARSAW

source: https://warszawa.wyborcza.pl/ (access: 2021-06-16)

The problem with this idea is that such a gallery could be created in any other space in the city, and the reaction of the inhabitants would be the same – indifferent, not starting a discussion, because the works did not ’touch’ their viewers in any way. This form of aestheticization merely marked a fragment of the city with an indication of how it should look. A contrast to the above example is the art installation “Greetings from Jerozolimskie Avenue” by Joanna Rajkowska. The project was inspired by the artist’s experiences, which in the process of creation she combined with the features and specificity of that place. The success lies in the importance the author attaches to the ‘place’ she chooses and boldly transforms, without imposing any interpretation, which is very important in this process. This art installation generates impulses for discussion about this space. To this day, the Palm evokes extreme emotions and divides the capital’s inhabitants into those open to change and different interpretations, and the followers of tradition.

PHOTO 3. ART INSTALLATION “GREETINGS FROM JEROZOLIMSKIE AVENUE”

source: https://www.odkrywamyzakryte.com/ (access: 2021-06-16)

Summary

Spatial order is an objective of spatial management and together with the principles of sustainable development form a reference system for all activities undertaken in this respect. It is an interdisciplinary concept. It brings coherence, order and harmony to the public space. In Poland, its condition is not satisfactory, we are very often dealing with spaces without context, shaped without consistency and urban planning. The accusations are often of ‘arbitrariness’, of building ‘what you want, where you want’, leading to point-scoring architecture. The problem is more and more often discussed in the Polish public debate, which gives hope. However, it cannot be said unequivocally that all public spaces in Poland without exception are characterised by spatial chaos – there are examples of high quality spaces, but this is too little to conclude that the problem does not exist.

Karol Kacprzak
Maintenance and Development Junior Specialist