Archives: Badania i publikacje AMRON

In mid-December last year, the Ministry of Economic Development and Technology announced the preparation of a new, comprehensive programme of support for people who want to buy their first flat. This programme will consist of two solutions, the first of which is addressed to people who are planning to buy an apartment now, the second to those who are planning to do so, but in a few years’ time.

Safe Mortgage Loan 2% is one of the two components of the First Flat Programme. It will be a preferential loan granted at a guaranteed fixed interest rate of 2% (plus other credit costs such as margin), which means an interest rate 3-4 times lower than the current offerings of commercial banks. This solution is intended to help in improving creditworthiness. The recommendation of the Polish Financial Supervision Authority, which has been in force since April last year, that obliges banks to accept a minimum change in the interest rate level by 5 pp in the process of assessing creditworthiness, has significantly reduced the creditworthiness of many people. In fact, this safety rule has resulted in many people not achieving creditworthiness with such an increased interest rate ceiling. As a result of the above recommendation, as well as the increase in interest rates by the Monetary Policy Council of the National Bank of Poland and rapidly rising real estate prices, the number of newly granted loans has fallen more than threefold over the past year – from 68 353 mortgage loans amounting to PLN 23.229 billion in Q3 2021 to 21 218 mortgage loans amounting to PLN 7.007 billion in Q3 2022. The new housing programme is expected to change the trend on the market.

CHART 1. NUMBER AND VALUE OF NEW HOUSING LOANS GRANTED QUARTERLY

source: self-study based on the SARFiN System data

The Ministry of Economic Development and Technology has announced changes to Recommendation S regarding the calculation of creditworthiness at fixed interest rate. For fixed-rate loans that are part of the First Flat Programme, the PFSA will reduce the interest rate level change buffer from 5% to 2.5%, i.e. prior to the entry into force of the current recommendations.

Safe Mortgage Loan 2% may be offered by all commercial banks that sign an agreement with Bank Gospodarstwa Krajowego. Loans that will be eligible for the programme have to present a market proposal for the cost of the loan, including both the interest amount, as well as the single instalment amount. The government will finance part of the loan instalment, which is the interest rate difference of more than 2% through Bank Gospodarstwa Krajowego. Thus, the cost to the client will be the loan interest rate of 2%, the margin, commission and other fees associated with granting of the loan. The subsidy from the state budget can be received for 10 years. Proposed solution will apply to loans with decreasing instalments, therefore the loan instalment will remain at the same level even after a 10-year period. During the loan repayment, the instalments will firstly consist of the paid-up capital. Funds from the programme can be used for housing purposes, which means both the purchase of an apartment, as well as purchase of the land plot and subsequent construction of a detached house.

Programme will be addressed to people under the age of 45 who have not previously owned a property. Disposal of real estate will not entitle to qualify for the scheme. It was tentatively announced that owners of a fraction of a property not exceeding 50%, acquired by inheritance, in which they do not live, will be able to sign to the programme. The maximum amount of credit that may be obtained for a one-person household is PLN 500 thousand, while for married couples or a parent with a child it is PLN 600 thousand. The indicated amount does not include own contribution. If the loan is granted to a married couple, the age condition will have to be met by only one of the spouses. Among the assumptions of the program, there is no restriction on the price of 1 sqm of flat acquired, nor on the usable floor area of the property that will qualify for the subsidy. The purchased property can originate from both the primary and secondary markets.

The second element of the First Flat Programme is Housing Account. This solution assumes that the beneficiary deposits funds in the amount of PLN 500 to PLN 2 000 per month over a period of 3 to 10 years. If after this time the funds are used for housing purposes, the State will pay bonus at the level of the indexation rate. This index has not yet been precisely defined, but it has been announced that it will be equivalent to the inflation rate for a given year or the rate of increase in house prices, if it turns out to be higher than inflation. Therefore, if inflation falls, but real estate prices rise above inflation, the last-mentioned will be the reference for determining the bonus amount. Housing bonus will be calculated annually and disbursed once when the funds are used for apartment or house purchase or as a financial contribution to an investment, such as housing cooperative.

Housing Account is planned to be available for a person who does not own a dwelling and has not owned a property in the past (including a single-family house or a cooperative right to a dwelling). A person who lives in one small apartment with at least two of their own or adopted children may also be beneficiary of the programme (i.e. a dwelling of up to 50 sqm with two children, 75 sqm with 3 children and 90 sqm with 4, with no limit of sqm with 5 or more children).

There are two solutions that will make this programme attractive. Firstly, it is a commercially interest-bearing deposit in a bank (currently interest rate on deposits reach 7-8%). Secondly, it is the possibility of obtaining the aforementioned housing bonus reaching up to the value of the indexation rate. Housing Account provides flexibility regarding monthly deposits, there is no obligation to declare what sums will be paid to the account, as long as it is in the range of PLN 500 to PLN 2 000 per month. This financial instrument provides for the retention of the right to the bonus also in the event of a lack of deposit in one month of the year. What is more, Housing Account allows to accumulate funds for the purchase of an apartment for a child over the age of 13. If the collected funds are used to purchase an apartment within 5 years of the child reaching the age of majority, the bonus will be paid. According to the Ministry of Economic Development and Technology, there is currently no other product in Poland or the world that rewards saving and gives such a high rate of return.

First Flat Programme is scheduled to start on July 1, 2023, which will be preceded by the introduction of the relevant act. The duration of the programme has not yet been specified, but it is intended to be a long-term solution. The assumptions of the First Flat Programme promise to be very favourable. Since the announcement of the programme, Safe Mortgage Loan 2% has been described as the cheapest loan ever, while Housing Account has been described as the best deposit on the market. Implementation of the programme will show how much it will boost mortgage lending and stimulate the housing market.

Marta PolkowskaSARFiN
System Data Administrator
Senior Maintenance and Development Specialist

With the prevailing energy crisis, as well as rising inflation, from spring 2023 it will be mandatory for owners of single-family houses and flats to pay for an energy performance certificate. In what circumstances and who will be required to have such a document? What will be the penalties for not having it?

What is an energy performance certificate (energy certificate)?

Since January 1, 2009, EU Directive 2002/91/EC has made energy certification mandatory in Poland, which means that every building (with certain exceptions) is required to have an energy performance certificate. An energy performance certificate, also called an energy passport or certificate, is not something new in Polish legislation. In a nutshell, it is a document that defines the energy standard of a given building. It contains a set of data and energy demand indicators for a building or a part of it.

The energy efficiency of a building should be understood as a degree, to which the building is prepared to meet the intended needs of its users while consuming the lowest possible energy. An energy efficiency assessment is an evaluation of a set of characteristics of a building that affect the energy consumption by that building required for its use, including, among other, an assessment of the thermal insulation of the building envelope and the efficiency of the installations and equipment used in the building.

Based on the information contained in the energy certificateut, we can find out how much energy a building consumes and what we need to do to reduce the maintenance costs. At a time of rising electricity costs, as well as heating costs, this information is very useful for owners of single-family houses and flats.

Currently, an energy certificate is required for buildings built after 2009. It is also required when the building is sold or rented. In addition, it is also required in case of many subsidy programmes for the thermal modernisation of existing buildings, e.g. for the replacement of a heating source (installation of a heat pump).

The document is valid for 10 years from the date of issue. However, it may become invalid before this period expires if, as a result of conversion or renovation, the energy performance of the certified building changes.

To whom the changes will apply?

According to the amendment to the Act on Energy Performance of Buildings signed by President Andrzej Duda on 7 October 2022, the an energy certificate will also be obligatory for properties built before 2009.

Due to legal changes, from the end of April 2023, the energy certificate will be an indispensable attachment to the sale agreement of a building or premise, the sale agreement of a cooperative ownership right to premises, as well as when signing a rent agreement. This obligation relates also to buildings built before 2009.

According to information from the Ministry of Development and Technology, if we, as owners of premises in a multi-family building, want to sell or rent a flat located in a building with no energy certyficate, we will compulsorily have to draw up an energy performance certificate for the part of the building concerned, i.e. for this flat, at our own expense. In addition, the legislator imposes an obligation on owners of rental properties to provide the annual energy demand indicators already in the advertisements. It should be emphasised that it will not be necessary to carry out an energy certificate, if you live in the house or flat and do not want to sell or rent it out.

The energy certificate will also be necessary for the construction of a house, as the acceptance of the building will not be possible without it. A copy of the certificate will have to be attached to the notification of completion of construction or the application for a use permit. All these changes result from the adaptation of the Polish law to EU law.

What are the penalties for not having an energy performance certificate?

Penalties for not having such a document will only be imposed on owners if they dispose of the property or rent it out. Until now, the penalty for not having an energy performance certificate was up to PLN 10 000. The new regulations do not specify the amount of the fine. Possible penalties are to be imposed by the notary at the time of the notarial action. It is expected that they may range from PLN several hundred to several thousand, depending on the type of property. A penalty may also be imposed on the person producing the energy certificate for providing information contrary to the requirements of the Act.

How much does an energy certificate cost?

It is necessary to pay for carrying out an energy audit and preparing a certificate. Prices depend on many factors, mainly on the size and purpose of the building, the location, the availability of technical documents, the technical solutions used or the complexity of the building shell. This is why most service providers offer the price of the service individually. On the Internet, one can find offers where the cost of making a certificate for a dwelling starts from PLN 200 and for a single-family house from PLN 250.

Who can carry out an energy certificate?

According to current legislation, the author of an energy performance certificate can only be a person who has been entered in the register of the persons authorised to draw up energy performance certificates. The list of companies authorised to issue an energy performance certificate can be checked in the central register of the energy performance of buildings on the Ministry of Development and Technology website.

The selected service provider may have a lot of questions about the building, such as how it was constructed, and how individual components or installations were installed. It is also the responsibility of the person drawing up the energy certificate to check all the elements that affect the energy requirements, i.e. heating, types and distribution of installations, or even the type of window frames and positioning of the building. It is therefore worth keeping documents confirming the thermal insulation performance of individual building elements.

Other changes related to the amendment of the Act

Each energy certificate is generated through the website of the Ministry of Development and Technology in the Central Register of Energy Performance of Buildings. The amended law introduces public access to basic information from the energy performance certificates collected in this register. Similar to the Central Register of Building Emissions, in which owners have to declare what is the main source of heating in their building, the Central Register of Energy Performance of Buildings is intended to improve knowledge of the energy situation of households in Poland.

Agnieszka Zamkowska
Real Estate Market Analyst

The long-lost competitiveness is beginning to return to the real estate market. Rising interest rates, with persistently high prices, have significantly reduced the creditworthiness of potential buyers. As a result, fewer and fewer people can afford to buy their own flat. Responding to the economic situation, developers have begun to reach for various solutions to attract customers to their investment. One of them is the proposal to finish the apartment in a turnkey standard.

“Turnkey” finished, what does it mean?

A turnkey finished apartment on the primary market is a new dwelling, in which no renovation work is necessary before moving in. In such a place, when you receive the keys, you will most often find floors and tiles laid, plastered and painted walls, as well as internal doors fitted. In addition, we may already have a permanent kitchen furniture and sanitary fixtures installed. It all depends on what options the entrepreneur has on offer and which one we decide on. The proposed finishing standards are usually divided into basic, standard and premium. Of course, the higher the standard, the higher the price. The chosen standards can vary both in terms of the quality of materials used and the amount of work carried out.

Advantages

Buying a turnkey apartment from a developer brings many benefits. First of all, it is a time-saver. Despite appearances, independent arrangement, selection of equipment or watching over the renovation team consumes a lot of energy. In the turnkey option, the developer is responsible for all this.

Such a solution also helps to avoid the so-called “bad decisions”. Lack of knowledge of the specifics of renovation affects unfavourable choices. In addition, we dispose of the problem of choosing a professional finishing team. Often our inexperience is sensed by pseudo-professionals, which translates into a lower quality of services provided.

The main advantages of buying a turnkey apartment may include financial savings. Although we will pay more for the apartment at the beginning, in the end it can be very profitable. The developer, when buying finishing materials for all apartments in the building, or at least for most of them, can negotiate much more favourable prices. The same applies to services. What’s more, we won’t be surprised by unforeseen costs that we forgot to take into account. We get an estimate from the developer and know in advance the amount we will have to spend on finishing.

It is also a solution that allows you to move earlier than when buying a property in a developer standard. Personally, we can start the finishing works only after receiving the keys, i.e. after the building has been permitted for use. The developer’s team, on the other hand, has the opportunity to finish the premises, while the rest of the employees, for example, paint the facade.

Disadvantages

Purchasing an apartment in a turnkey finishing standard also has disadvantages – primarily, lack of impact on the final appearance of the apartment. Of course, some changes to the developer’s design are possible, but they are quite limited. We also have to take into account the fact that every individual adjustment is extra charged. In addition, a situation when the final finish of the apartment differs significantly from the visualization presented by the architects, is not rare.

There is also the problem of the quality of services rendered. Entrepreneurs counting costs often choose external finishing companies that offer the best rate. As usual, the price goes hand in hand with the quality. The errors most frequently pointed out include e.g. uneven plasters, poorly laid tiles or unevenly painted walls. It is not uncommon that individual elements are already damaged, e.g. scratched floor, dents or stains on the walls. It is true that we can appeal and ask for repair, but this involves additional waiting time for acceptance of premises.

Is it worth buying a turnkey apartment?

This is an individual decision and depends on many factors. It is a perfect solution for buyers living in another city, traveling on business or very busy people who cannot devote enough time to furnishing the apartment. Unfortunately, it will not be a good option for individualists, who want to arrange every corner according to their own needs.

However, it is an interesting proposition for people, who are looking for apartments for investment purposes. Such consumers care about an attractive finish, but they do not pay attention to original solutions. Often they do not want to spend time on renovations, but they want to rent the premises as soon as possible and profit from it.

Joanna Woźniak
Junior Specialist for Maintenance and Development of the AMRON System

Until the mortgage, which is the basic collateral of a mortgage loan, is effectively entered into the mortgage register of the property, bank is exposed to higher risk related to inadequate collateral for the credit facility. As a consequence, banks used to require a temporary collateral in form of so-called bridge insurance for the period from disbursement of the loan till the mortgage is established, i.e. until the date, when the registration of the mortgage in mortgage register is valid.

The insurance was executed in two ways: by additional insurance contribution paid by the borrower, amounting to approx. 0.07 – 0.1% of the value of the loan or, the most often, by temporary increase in margin.

TABLE 1. DATA ON MORTGAGE LOANS GRANTED IN Q3 2021

bank	value of new loans	number of new loans	average value of a new loan	level of bridge insurance
PKO Bank Polski	5 000 000 000	9 097	549 632	0.09%
Santander Bank Polska	2 847 030 000	8 283	343 720	1.00%
mBank	2 673 000 000	6 451	414 354	1.50%
Bank Millennium	2 249 000 000	7 957	282 644	1.00%
BNP Paribas	1 705 000 000	4 029	423 182	1.50%
Alior Bank	944 396 231	2 859	330 324	2.50%
Bank Pocztowy	11 663 789	46	253 561	0.09%
	15 430 090 020	38 722	on average: 371 060	on average: 1.10%

source: elaboration by Ministry of Justice based on: https://prnews.pl/raport-prnews-pl-rynek-kredytow-hipotecznych-iii-kw-2021-462315 (as for: 24.01.2022)

In recent years, the time needed for establishing the mortgage significantly increased in most of mortgage district courts. This resulted from both legal changes, in particular due to the act of July 20, 2018 on transformation of perpetual usufruct right to plots under residential buildings into the ownership right (Official Journal of 2018, item 1716), and reasons independent from State interference, i.e. COVID-19 pandemics. According to statistics published by the District Court for Warszawa-Mokotów in Warsaw, dealing with all applications related to mortgage registers of properties located in the city of Warsaw, in 2019 the number of mortgage applications accounted for 541 527, in 2020 it was 557 069, and in 2021 – 427 477, while in 2018 there were only 249 691 such applications. It is very difficult to estimate the time necessary for valid registration of the mortgage in mortgage register both for the borrower and for the bank. It depends not only from the city, where the property is located, but even from the particular court’s division, and differences happen to be huge. For example, in District Court in Opole, the mortgage entry took approx. 1 month, in Bialystok – 2 months, while in Warsaw or Gdansk it took even a year. In addition, one of decisive factors was whether the loan was taken for finance the purchase of property on secondary market (most of existing properties are already registered in mortgage register) or on primary market – in such case, the property must be registered in mortgage register first. In effect, the borrowers were uncertain about the final cost related to the effective mortgage entry, which increased the monthly loan instalment.

This problem was noticed by the government, which submitted to the parliament the draft act on changes in the Mortgage Loan Act of March 23, 2017 (Official Journal of 2020, item 1027 and 2320 and of 2022, item 872). As it was presented in the explanatory memorandum to the draft, in case of an average mortgage loan amounting to PLN 371 060 granted for 25 years, the average instalment was equal to PLN 2 839.36, while the average extra margin equivalent related to the waiting time for mortgage entry amounted to PLN 273.83 per month. Assuming the 8 months period, the total amount charged form the borrower was as high as PLN 2 190.65.

The Ministry stressed that in practice vast majority of mortgage applications are accepted by courts – rejected applications constituted only 1.6% of all considered applications in 2020-2021 (statistics include not only applications for mortgage entry, but also for change or removal). Therefore, the authors of draft proposed that all costs related with the mortgage entry paid by the borrower should be returned.

During the public consultations, it was pointed out that despite from justified and legitimate purpose of the new law, as there is no reason for consumers to pay for dilatory in justice administration, there is also no justification for transferring those costs to banks, which also have no influence on processing time of mortgage applications. In addition, it is irrelevant from the perspective of the bridge insurance whether the mortgage application will be accepted or rejected, as the insurance does not cover from risk of rejection, but provides guarantee against the non-repayment of loan before effective and strong collateral is established, i.e. against the situation when enforcement proceedings are impossible to conduct because of lack of effective mortgage entry in the mortgage register. What is more, in case when risk determined in insurance agreement does not materialise, the insurance company does not return the cost of insurance policy neither to bank, or to any other client. However, despite the questions and comments, the act was adopted in the Parliament, with no substantial changes.

On September 5, 2022, the Parliament adopted the aforementioned act and changes came into force on September 17, 2022. According to the act: „in case of granting a mortgage loan, loan agreement may provide for an additional cost related to processing time of mortgage application, which will be bore by the borrower until the effective mortgage entry into the mortgage register”, but this additional cost will be returned to the consumer or allocated to repayment of the outstanding loan amount, when the mortgage entry is valid. Finally, the borrower will not be charged for risk related to that collateral.

It should be pointed out that the new law is applicable only to new mortgage loan agreements concluded by consumers (i.e. to loans not related to business activity of the borrowers), and the obligatory recovery of costs related to bridge insurances is applicable in case of loan agreements concluded after the date of entry into force of the act, as well as in case of loan agreements concluded before that date, if on the date of new law’s entry into force the mortgage application has not yet been determined.

Irena Kruczek-Sidło
AMRON System Coordinator

On 1 January 1995, with the entry into force of the Act on Premises Ownership, the concept of a housing association was introduced, defined as an obligatory form of association of owners of premises in property – a new legal and property entity in Polish law. The Act was not the first piece of legislation to regulate the ownership of premises, earlier these issues were regulated by the Civil Code. The management of the common property was regulated much earlier, with the entry into force of the Decree of the President of the Republic of Poland of 24 October 1934 on ownership. The separation of independent premises in a multi-apartment building resulted in a common property and the need to manage it. Referring to Chapter I, Article 3 of the Premises Ownership Act – the common real estate is the land and those parts of the building, which are not part of the premises and do not serve exclusively for the use of the owners of the premises.

The fundamental differences between large and small housing association are the legal basis, on which they operate. Knowledge of these differences and of the fact that with the ownership of premises comes a share in the common property can be helpful when making decisions on purchase of a flat.

Common property management in a large housing association

Large housing association includes more than three premises. Being the owner of the premises, you and the rest of the owners can determine the manner of management of the common part in the agreement on the establishment of separate ownership of premises or later in a contract (in the form of a notarial deed). In case of a large community, the owners of the premises are obliged to adopt a resolution on the management board election. The most common forms of management are owner management, entrusted management or forced management. Only an individual can become a member of the management board – regardless of whether or not this person is a member of the housing association. The duties of the management board are set out in the Act on Premises Ownership – among other things, it is obliged to manage the affairs of the housing association and has a representative function.

One of the features that distinguish housing communities is the way, in which the management board takes actions. Basically, two types of actions can be distinguished: ordinary management actions, which are taken independently by the management board, and actions exceeding the scope of ordinary management, for which a resolution of the apartment owners giving a power of attorney to enter into contracts and consenting to its execution is necessary. In large housing associations, resolutions play a very important role. Resolutions of the owners are adopted at meetings of the housing association or during an individual collection of votes by the management board – a resolution is adopted after obtaining a majority of votes. Each of them may be challenged in court by the owner of the premises on such grounds as:

• non-compliance with legal provisions,
• infringement of the principles of proper functioning and management of the property,
• non-compliance with the agreement of the owners of premises,
• other infringement of the owner’s interest.

The Law on Premises Ownership allows for the possibility of suspending or dismissing individual members or the entire management board – mainly to avoid situations, when the management board may expose the community to ineffective management, making decisions that are not in line with the majority of community members. The dismissal or suspension is carried out by means of the adoption of a resolution by the majority of the owners.

In large housing associations, the management board is also obliged to convene a meeting of the housing association at least once a year in the first quarter. According to Article 32 of the Apartment Ownership Act, the management board notifies each apartment owner in writing of the owners’ meeting at least one week before the meeting. During the community meeting:

• the owners of the apartments should adopt a resolution on the annual business plan and possibly on the amount of the advances to be paid to cover costs;
• the management board should submit a report on its activities, and the owners of the apartments should assess these and adopt a resolution on the approval of the management board ;
• evaluation of the management board/property manager.

If a meeting is not convened by the management board or property manager within the specified time, the Act provides that the owners of the premises have the right to convene such a meeting themselves. Each owner may have a proxy and be represented by him or her at the meeting. When a resolution is passed, the management board is obliged to inform all owners of this fact.

Common property management in a small housing association

According to Article 19 of the Premises Ownership Act: “If the number of separate premises and non-separated premises still belonging to the current owner is not greater than three, the regulations of the Civil Code and the Civil Procedure Code on joint ownership shall apply to the management of the common property accordingly.” This means that if the manner of management of the common part is not regulated, owners in small housing associations decide on the operation based on the above legal basis.

According to article 200 of the Civil Code, each co-owner has a duty to participate in the management of the common thing (so-called direct management). The difference between the types of housing associations is also noticeable at the level of management activities. For acts of ordinary management in a small housing association, the consent of the majority of the apartment owners is necessary, while for acts exceeding ordinary management the consent of all co-owners is needed. In case of lack of consent for ordinary management acts, each owner may ask the court to give authority to do so, while in case of lack of consent for acts exceeding ordinary management, owners who hold more than half of the shares may ask the court to make a decision, taking into account the interests of all co-owners.

Premises’ owners may also request a court decision if the majority of co-owners intend to take actions, which are contrary to the proper functioning of the housing association. It is also important to note that at the same time, the owners of the premises have the right to apply to the court for the appointment of a property manager, if the decision-making in the housing association is problematic or violates the rules of proper management and harms the minority. It is important to mention that in small housing associations there are no resolutions in operation – the owners make decisions by agreement. A characteristic feature of management in a small housing association is the equality of rights and obligations of all co-owners. This means making decisions collectively, but also implementing them together. The management board is not appointed. It is possible to entrust the management to an external entity – by means of the first agreement on the establishment of separate ownership of the premises, or later in a resolution of the owners recorded by a notary public. Due to the fact that housing associations of up to three premises base their operation on the Civil Code and the Code of Civil Procedure, their management is somewhat more complicated than that of large associations – the situation when one of association members is absent may serve as an example. Then, for example, it is impossible to adopt a business plan. On the other hand, in small housing associations, the owners may have a stronger influence on decision-making.

Summary

Small housing associations, unlike large ones, are not obliged to appoint a management board, although if the owners have reached an agreement, then nothing prevents them from appointing one. Small housing associations operate on the basis of the Civil Code and the Code of Civil Procedure, whereas large ones are based on the Apartment Ownership Act. Actions exceeding the scope of ordinary management may be performed with the consent of all owners, in case of large housing associations – their majority in the form of resolutions. Ordinary management actions require the consent of the majority of owners, while in large housing associations the management board takes them independently. In housing associations with more than three premises, the removal or suspension of the management board can be requested at any time by a resolution of the owners. Cases in small housing associations that are disputed and no agreement can be reached, may be settled in court.

Karol Kacprzak
Maintenance and Development Specialist

Attempts to answer the question ‘to buy or to rent’ have been appearing in the publications of many housing market analysts for quite a long time. Naturally, the answer is not obvious. We all know pros and cons of both forms of meeting housing needs. Buying a flat, even when taking a long-term mortgage loan, is also a form of saving, investing owned or accumulated capital, building a sense of long-term stability and security, also in the context of having a source of permanent rental income. Moreover, in future this capital may be passed on to next generations. On the other hand, the purchase of a flat is associated not only with significant financial expenditures, but also creates a permanent obligation in form of the necessary maintenance costs. In turn, renting a flat offers the ability to adjust the size of the property, its location or the level of costs incurred to the current needs and financial capabilities of the tenant. It is also important that there is no need to incur long-term liabilities and demonstrate creditworthiness at the same time. All this, however, at the price of spending money purely for consumption, without the effect of capital accumulation. We are also aware that both forms respond to the needs of a slightly different type of consumers. Renting a flat will be a choice of those market participants, who do not want or do not have to decide on stabilization or for whom the rental is related to the necessity of satisfying a longer or shorter, but still temporary housing need. On the other hand, the purchase is going to be made by those, for whom a sense of stability is important.

Dynamic changes taking place in recent quarters in the environment of the residential market significantly changed its structure. Increases in the interest rates of the National Bank of Poland – from 0.10% in October last year to 6.75% currently, along with rising inflation and amended Recommendation S of the Polish Financial Supervision Authority, obliging banks to take into account an additional 5% buffer for an increase in interest rates (also in case of fixed-rate loans), contributed to over 50% decrease in borrowers’ creditworthiness. As a result, in a following quarters we have noted significant decreases in the number of newly granted housing loans. On the other hand, rapidly growing cost of living, together with rising prices of flats, resulted in a very marked decline in the price availability of flats to the level recorded recently in 2014, with the prospect of further declines in the coming quarters. This is indicated by the Housing Accessibility Index listed by the AMRON Centre.

source: AMRON

Despite increases in rents, such dynamic changes did not take place on the rental market. According to AMRON Centre’s data, the average cost of renting a two-room apartment of a floor area of ​​approximately 45 sqm in Warsaw in the second quarter of 2021 amounted to PLN 1 528 per month, obviously excluding administrative fees and utilities. With an interest rate of 2.48% (valid at that moment) and the flat price level (on average PLN 10 200 per square meter), monthly loan instalment was slightly higher and amounted to PLN 1 559. In the second quarter of 2022, after a fundamental change on the demand side of the rental market, resulting not only from students return to full-time classes, but also to the influx of a large number of refugees to Poland after Russia’s aggression against Ukraine, the average rent for an apartment of this size amounted to PLN 2 115. Thus, the increase in rent rate during the year was 38.5%. At the same time, however, as a result of an increase in loan interest rates (up to 9.06%) and the increase in housing prices (up to PLN 11 300 per square meter), the instalment of a loan taken for the purchase of such a flat almost doubled (increase by 98.5%) and amounted to PLN 3 095. As a result, the difference between the level of rent and the loan instalment was almost 50%. This disproportion is shown at the diagram below.

source: AMRON

It should be noted, however, that this analysis takes into account both apartments from the most popular segment (two-room apartments with the floor area of about 40 sqm) and a loan taken for 25 years with LtV level close to 80%, which is also the most popular on the market (approx. 75% of all granted loans). Naturally, for loans with a lower LtV ratio, these differences will be smaller.

The ’ to buy or to rent’ alternative for a large number of the market participants seems not to be realistic any more. In current market situation, they simply cannot afford to buy an apartment and therefore rent remains the only possible choice. Still we should remember that a further increase in the demand for flats for rent will also mean further, perhaps quite dynamic increases in the level of rent rates, especially that in current situation we can expect a decline in the number of purchases of flats for investment (i.e. for rent), which have been so popular in recent years.

Jerzy Ptaszyński
Research and Market Service Director

Central Statistical Office announced recently the so-called quick estimate of the Consumer Price Index, which in September 2022 was quoted at 17.2%. Inflation at a similar level was recorded last time in February 1997. Therefore, it is the highest notation of inflation in the current century. What matters the most from the point of view of both mortgage and housing markets is that this increase exceeded analysts’ forecasts and it makes the following decisions on further increases in interest rates even more plausible. A year ago, in October 2021, the NBP reference rate was only 0.10%. After 11 consecutive monthly increases, it is 6.75% now, with a prospect of further growth. Increases in interest rates, as well as new requirements of the amended “Recommendation S” of the Polish Financial Supervision Authority, effective from 1st of July this year, obliging banks to include an extra 5% risk buffer for increases in interest rates (interestingly also in case of fixed-rate loans), contributed to significant, over 50% decrease in the creditworthiness of potential borrowers. As a result, in following quarters we have observed drastic drops in the number of newly granted housing loans. In second quarter of this year, compared to the number of loans granted in the same quarter of the previous year, 43.70% less mortgage loans were granted for an amount lower by 38.85%. This meant a clear deepening of the trend that emerged in the first quarter of 2022, which definitively will continue or even deepen in following quarters.

Additionally, dynamically growing costs of living, combined with the rising flats prices, resulted in very apparent decline in the price availability of flats. This is indicated by the Housing Accessibility Index listed by the AMRON Centre, the quotations of which in the second quarter of the year fell to 162 points, i.e. to the level comparable to the one recorded in 2014. Both these factors (decrease in loan availability and decrease in housing availability) contributed to a very clear reduction of turnover on the housing market. It is estimated that the number of apartment sales transactions has even dropped by half as compared to the number of transactions concluded a year ago. Despite such a significant reduction in demand on the housing market, preliminary AMRON Centre data for the third quarter of this year do not indicate significant flats prices drops in nominal terms in the largest Polish cities, as expected by some market observers. At present, however, we can talk about a very marked slowdown in their growth dynamics.

CHART 1. AVERAGE TRANSACTION PRICES OF 1 M2 OF APARTMENT IN SELECTED CITIES

source: AMRON

The biggest change recorded on the markets of the six largest Polish cities is a decrease by 3.34% in the average transaction price in Lodz. At the end of September, it amounted to PLN 6 464, which was PLN 223 less than in the previous quarter. Slightly lower declines, by 1.96% and 1.61%, respectively, were recorded in Cracow and Gdansk. On the other hand, the average prices in Warsaw and Wroclaw increased – by 0.94% and 2.20%, respectively (to PLN 11 355 and PLN 8 906), and the average price per square meter in Poznan remained basically unchanged (an increase by 0.03%, i.e. PLN 2.37 per square meter). In other voivodship capitals, drops in average prices by 3.39% in Bydgoszcz and by 2.84% in Katowice, were the largest recorded changes. These results should of course be treated as preliminary estimates.

TABLE 1. AVERAGE TRANSACTION PRICES OF 1 M2 OF APARTMENT AND THEIR CHANGES IN SELECTED POLISH CITIES IN Q3 2022 (PRELIMINARY ESTIMATES)

city	Price in Q3 2022	Change Q3 2022/Q2 2022	Change 2022/2021
Warsaw	11 355	0.94%	5.75%
Wroclaw	8 905	2.20%	12.27%
Gdansk	9 228	-1.61%	0.61%
Cracow	9 658	-1.96%	4.42%
Poznan	7 675	0.03%	0.98%
Lodz	6 464	-3.34%	4.45%

source: AMRON

Lack of continuation or a decisive breakthrough of the trend indicates that the housing market in a very dynamic environment is still looking for a new equilibrium point and observed changes result largely rather from changes in the structure of turnover than from absolute changes in housing prices. In context of rising inflation, however, it is worth noting that the dynamics of changes in average home prices in the largest Polish cities over the horizon of four quarters is clearly lower than the level of growth in the Consumer Price Index recorded by the Central Statistical Office. This naturally signifies a decline in home prices in real terms.

Jerzy Ptaszyński
Research and Market Service Director

The change to the Spatial Planning and Development Act is a part of the National Reconstruction Plan. The reform is expected to improve cooperation between local government units and investors. It assumes simplification of planning procedures, clarification of rules for issuing land development decisions, or replacement of the study of conditions with a general plan. The draft spatial planning reform was presented at the beginning of this year. The amendment to the law is currently under consultation. It is likely to be enacted and come into force in early 2023. The following are some of the significant changes and assumptions that will take effect then.

The National Reconstruction Plan assumes that the amendment aims, among other things, is to adopt general plans for municipalities by mid-2026. The new planning tool, which will be the municipality’s general plan, would replace the existing study of conditioning and the directions of the land use planning. Importantly, the general plan would be enacted to the degree of a local law. It is supposed to be a simple and concise set of rules telling about the development of the municipality’s space. The uncomplicated form of the general plan is to make it easier to read the contents of plans adopted in individual municipalities and to standardize them. There will also be a new act, the Integrated Investment Plan, which is a type of local plan. It is to be enacted by the municipal council giving the opportunity to locate the project taking into account the principles of spatial order. It will be applied to larger developments, not just residential. The municipality and the investor will conclude an urban planning agreement, which will make it possible to clearly define mutual obligations and detailed rules for the implementation of a specific investment.

The project of the law provides for the possibility of establishing in the general plan accessibility standards for social infrastructure – elementary school and public green areas. The draft specifies the distances that should divide a registered plot of land from certain elements of social infrastructure. Consequently, if accessibility standards are established in the municipality, the issuance of a Decision on Land Development and Management Conditions for buildings will be possible if each of the registered parcels of land that are the subject of the project meets infrastructure accessibility standards through access to the facilities, and there are access roads along public roads.

Changes to the law will also apply to the process of issuing development decisions. The amendment provides for linking the decision to the municipality’s general plan, particularly with regard to urban functions and indicators. Decisions on land development will be issued only in areas where this will be permitted in the municipality’s general plan. These assumptions are intended to contribute to stopping and monitoring the uncontrolled spread of development. The change to the law also provides for the introduction of a time limit on the validity of the decision on land development – currently it is issued without a time limit. If the amendments go into effect, the decision will expire 5 years after the date on which the decision became final. After this period, it will not be possible to apply for a building permit based on this decision. Importantly, the amendment is also expected to apply to decisions issued before its enactment.

The proposed law lists additional parameters and indicators that were not previously considered when issuing a regulation on how to determine the requirements for new development and land use in the absence of a local plan. Parameters that have not been listed so far are the maximum and minimum intensity of development, the minimum percentage of biologically active area (land area that is not built on, but is covered with plants and allows natural water retention) in relation to the land area, and the minimum number of parking spaces.

The project act also provides for a change in the system for imposing the planning fee. According to the current legislation, the planning fee is imposed for two reasons: the increase in the value of the property in connection with the enactment of the local plan and the disposal of the property within 5 years from the date of entry into force of the plan, and these conditions must be met at the same time. The law determines that the amount of the fee cannot be higher than 30% of the increase in the value of the property and is charged on a one-time basis. In practice, it happens that owners of a property whose value has increased as a result of the approval of the plan wait 5 years before selling it, and after this period they sell it without paying the planning rent. The proposed paragraph on the fee in connection with the increase in value of the property reads as follows: „If, in connection with the enactment of the local plan or its amendment, the value of the real estate has increased, the mayor, mayor or city president shall charge the owner or perpetual usufructuary of this real estate a fee in the amount of 30% of the increase in the value of the real estate, constituting the municipality’s own income”. This means that the basis for imposing the planning fee will be the fact of the increase in the value of the property as a result of the enactment of the plan, whether or not the property is sold, and the amount of the fee will be 30% of the increase in the value of the property. Similarly, the fee will be charged if the value of the property increases as a result of the issuance of a development decision. This change will eliminate the habit of delaying the sale of real estate for 5 years after the plan is enacted.

One of the innovations expected to come into effect in 2026 is the introduction of the Urban Planning Registry, which is an ICT system. The Registry will be a source of planning and land use planning data, and will contain documents generated during the preparation of planning acts, administrative decisions related to planning, etc. It is to be a free, integral information system available to all interested persons.

The draft law on amendments to the Law on Spatial Planning and Development indicates significant changes affecting the creation of space. The topics listed above are only part of the planned changes to the legislation. The amendment is quite broad in scope, and aims, among other things, to eliminate the problem of incidental and uncontrolled development of areas not covered by local plans. One of the more important changes is the introduction of a general plan, defining the municipality’s spatial policy, to replace the existing study. An important change is the revolution of imposing a planning fee. Which results in increased revenues for municipal budgets. Currently the draft is at the opinion stage, but in all likelihood it will be passed soon. It is worth to follow the next stages of work on this reformation.

Małgorzata Kwiatkowska
Maintenance and Development Junior Specialist

In times of rising inflation, it is good to find the right way to protect and multiply your savings. There are many options for increasing capital, such as purchasing of government bonds, shares on the Stock Exchange, mutual funds, setting up deposits and savings accounts, investing in gold or real estate. The tangible nature of property has the advantage over other forms of capital investment that it gives a sense of real ownership. In the case of rental properties, it is additionally possible to earn a passive income. Therefore, investing in real estate is a popular method of saving.

There are many ways to make money from real estate. They differ, among other things, in the rate of return on investment or capital investment risk. The most common forms of investing in real estate are land purchase, flat for rent, business premises and, more and more popular, house flipping (purchase of an apartment at a bargain price for renovation and selling it with profit after renovation), second home (purchase of a second apartment, which can be made available to tourists for a fee during absence), condo-hotel and aparthotel (the purchase and rental of a room or an apartment without the need for management, as all maintenance and tenants search activities are performed by the operator).

Buying a flat for rent has many advantages, including:

• securing of the capital,
• low risk of losing the invested money,
• possibility to benefit from tax reliefs,
• the possibility of using the property as collateral for a mortgage loan for the purchase of another property,
• high chance of a return on invested capital over time,
• generating passive income, i.e. steady cash inflow from rent.
• It should not be forgotten that investing in rental properties also has some disadvantages, such as:
• the need to have large financial resources for the purchase of property,
• cyclical additional fees, including rental tax and so-called hidden costs (costs related to interruptions of demand in short-term rentals or costs of servicing and consumption of the flat),
• long payback time,
• the risk of losses associated, for example, with rising interest rates on loan-financed properties.

As owning a flat is often a secure investment, many investors choose to buy holiday flats. Such a property entices not only with the anticipated profits, but also with the possibility of using it as owners.

When purchasing a holiday apartment that is expected to generate a reliable income, particular attention should be paid to its location. Each place is characterised by its own seasonality. Seaside and Warmia and Mazuria are visited by tourists mainly in summer. The season in seaside and lakes resorts lasts mainly from June to September and holiday flats remain empty for most of the year. Slightly shorter, but more frequent holidays are planned by tourists in mountains. Resorts located in the south of Poland are visited both in summer and winter. On the other hand, large cities are characterised by less seasonality, as they are frequented regardless of the weather.

The attractiveness of the region is very important. Tourists usually expect close proximity to the beach, ski lifts, hiking and cycling trails, green areas, monuments and attractions in the area and restaurants and shops. When choosing the perfect place to buy an apartment for short-term rental, it is worth paying attention to the amenities available in the facility or its vicinity, such as a swimming pool or a children’s playground.

When considering the purchase of a holiday property, it is important to choose the type of property – whether it should be an independent holiday apartment (managed personally or by an external company), condo-hotel or aparthotel.

Independent apartments are a good investment for people, whose priority is their own place where they can spend their holidays, rather than earning a rental income. In this case, the investor decides on his own about interior fittings, has an impact on the costs of servicing the premises and the amount of rental charges. Additionally, he can use his property at any time.

A condo-hotel is a hotel facility consisting of legally separate self-contained commercial premises. Flats generally consist of 1-2 hotel rooms with a bathroom. The option with a kitchenette is rarely available. On the other hand, in case of aparthotels, the investor has ownership of the entire apartment. From the end-user point of view, the mentioned types of objects are the same, as they are aimed at people looking for short-term rental properties. Both objects are managed by specialised companies that run the reception, as well as service guests and premises. For the services they provide, they receive part of the rental income, while the rest of the money goes to investors. If you want to invest your capital in a condo-hotel or aparthotel, it is worth carefully checking the operator of the selected object and the provisions of the contract.

Buying a property in an attractive location is associated with a very large expense. Prices of premises in prestigious seaside resorts such as Sopot, Hel, Gdańsk, Gdynia, Władysławowo, Międzyzdroje or mountain resorts such as Zakopane, Białka Tatrzańska, Szczawnica, Karpacz, Szklarska Poręba, are the highest and amount to the rates in the largest Polish cities. The most expensive real estate can cost even tens of thousands of zlotys per square meter. At the same time, the profitability of the most attractive apartments, finished to a high standard, can reach up to 8%.

The very high prices of flats in Polish resorts are due to the specific nature of this market. A significant part of the investment is characterised by a high standard of an apartment and a prestigious location, which affects the prices for accommodation. The final price per night also depends on factors such as the amenities available or the number of beds. On average, the cost of renting an apartment is several hundred zlotys per night.

According to the Central Statistical Office, until 2019 there was observed a steady increase in the number of hotel guests. In 2019, the number reached a record of 23.5 million tourists. Due to the outbreak of the coronavirus pandemic and, consequently, the introduction of lockdowns, during which hotel operations were severely limited, in 2020 there was decline of 53%, to 11.1 million people. In 2021, the number of hotel guests amounted to 14.4 million, despite the difficult beginning of the year resulting from the shortened winter holidays and the introduction of maximum hotel occupancy restrictions. Therefore, when comparing the year 2021 to 2020, we can see 29% increase in the number of tourists. However, it is not yet at pre-pandemic level.

GRAPH 1. NUMBER OF HOTEL GUESTS IN POLAND (mio) 2015-2021

source: own study based on the Central Statistical Office data

When considering the decision to invest capital in a holiday apartment, it is important to bear in mind that investing in holiday properties involves considerable risk. The best example are the events of recent years related to the coronavirus pandemic. The consequences of these events can be seen, among other things, in the above-mentioned decrease in the number of hotel guests. Nevertheless, the holiday real estate market is constantly evolving.

According to the report “Hotel and condo-hotel market in Poland 2022” prepared by the Emmerson Evaluation, the supply of investment apartments in condo-hotels and facilities with holiday flats until the end of the first half of 2022 was, respectively:

• in the seaside areas: 18 451 apartments,
• in the mountain areas: 12 498 apartments,
• in the Warmia and Mazuria: 964 apartments,
• in the agglomerations: 8 744 apartments.

According to the forecasts contained in the aforementioned report, by 2024 the number of investment apartments will increase by 13.9% in the seaside area (2 556 flats planned to be built), by 20.4% in the mountain area (2 555 flats planned to be built), by 27.5% in the Warmia and Mazuria (265 flats planned to be built) and by 12.2% in the agglomerations (1 066 flats planned to be built).

Most often, real estate increases in value over time, so it seems ideal for capital investment and multiplying savings. However, it should be remembered that such investments are exposed to various unknowns and risks. The decision to invest in a holiday property should be preceded by a thorough analysis of the situation in the region, as well as one’s own needs and possibilities. Only on the basis of such an analysis is it possible to evaluate the profitability of the investment.

Monika Kubisz
AMRON System Coordinator

Year 2022 is another period of dynamic increases in home maintenance costs. According to data from the Central Statistical Office in July this year, these costs were higher than in the corresponding period of 2021 by an average of 25.3%. The fastest increases were in gas and fuel costs – by 44.9% and as much as 131.2%, respectively. There are approximately 5.5 million single-family buildings in Poland, inhabited by more than half of our country’s population. Despite the considerable activity of individual investors observed in recent years, most of them are still buildings that do not meet current functional and technical requirements, including in particular those relating to thermal insulation. Many of them are not insulated at all, heated by heat sources with low efficiency and high emissions at the same time. The mismatch of the size or functional layout of the building to actual needs of people living in it also turns out to be a problem, especially in context of bearing maintaining and heating costs. This mainly applies to located in rural areas single-family houses, built in the 1980s and 1990s, which were supposed to accommodate two or sometimes even three generations of families. Thus, despite the fact that Poland still ranks fifth from the bottom in Europe in terms of percentage of people living in overcrowded apartments, many houses, requiring significant heating expenditure are at the same time at least partially unused. Also, a large number of houses built after year 2000 leave much to be desired in terms of energy efficiency.

The applicable regulations force designers and investors to meet higher and higher standards in terms of energy efficiency of buildings. It seems however, that in this case an equally important factor is the awareness of individual investors who are more and more rational in their approach to building a house. This applies not only to the choice of construction technology of the building or the method of its heating, but also to a change in the approach to its functionality and aesthetics. This change can be seen in catalogs of houses projects. Complex shapes of buildings with equally complex, multi-slope roofs, increasing the area of ​​external surfaces and thus energy losses are less and less popular. Instead, buildings with simple shapes and solutions aimed at saving energy, such as foundation slabs or energy recovery devices, are steadily gaining in popularity. Importantly, the house does not have to be huge anymore. According to AMRON Centre data, the average usable floor area of ​​houses built by both individual investors and developers has been systematically declining since the turn of the century. Chart 1 shows how the average floor area of ​​single-family houses built in Poland has changed over the last 70 years.

CHART 1. AVERAGE FLOOR AREA OF COMPLETED SINGLE-FAMILY HOUSES

source: AMRON

From the 1950s until the second half of the 1990s, we had a steady upward trend in the average usable area of a house in Poland. The size of 100 square meters was exceeded already in 1955, and the maximum average area of the house was recorded in 1997. It was on average 164.12 square meters. Interestingly, the area of houses built in urban areas throughout this period was significantly higher than those located in rural areas. In case of urban areas, the maximum floor area was recorded in 1996 and amounted to 173.75 square meters, while in case of houses built in rural areas, the maximum average usable area was recorded in 1997 and amounted to 150.76 square meters.

CHART 2. AVERAGE FLOOR AREA OF COMPLETED SINGLE-FAMILY HOUSES (URBAN AND RURAL AREAS)

source: AMRON

The increase in the floor area of ​​houses in this period was related not only to increasing level of wealth of the society, but also to the limited possibility of meeting housing needs in a way other than building a house that could accommodate even several generations. Social and economic changes that have taken place in Poland since the beginning of the century, including changes in the real estate market, dynamic growth of the real estate development sector, increase in the availability of mortgages and housing have caused a decisive change in investment and purchase decisions of Poles and a reversal of the trend. Consequently, the average floor area of ​​a house built in 2021 was 139.12 sqm, which was more than 15% lower than that recorded in 1997. As before, larger houses continue to be built in cities or their immediate vicinity. For urban areas, the average area of ​​houses was 141.76 square meters, and as for rural areas it was 133.53 square meters, which is 18.5% and 11.4% less than the end of the 1990s, respectively.

The data on the turnover structure shows that the trends seen in the activities of individual investors also apply to the preferences of home buyers. The average usable area of ​​the house for sale in 2021 was 139.34 square meters and was over 35 square meters lower than in 2000. A comparison of the market structure in terms of the size of usable area indicates a significant increase in popularity of houses with an area of ​​up to 100 square meters. Their market share in 2000 was 18.8%, while in 2021 it was already 27.4%. There has also been a slight increase in the market share of the most popular houses, with a usable area of ​​100 to 150 square meters. In 2021, they accounted for 41.7% of transactions concluded on the market, by 0.8 pp. more than in 2000. The share of all other house size categories was significantly lower than in 2000.

CHART 3. SINGLE-FAMILY HOUSES MARKET STRUCTURE IN POLAND IN TERMS OF USABLE FLOOR AREA 2000 – 2021

source: AMRON

The structure of the single-family houses market in terms of building age shows that the majority of houses sold are still buildings from the old stock, i.e. dating from before 2000. Buildings that may meet today’s functional standards accounted for about 40-41% of the properties sold. Given the quality of older buildings however, it must be assumed that a significant portion of them are purchased either with the intention of demolition or of recreational use.

CHART 4. SINGLE-FAMILY HOUSES MARKET STRUCTURE IN POLAND IN TERMS OF THE AGE OF THE HOUSE IN 2021

source: AMRON

A comparison of the Polish market of single-family houses with the markets of other European countries shows a convergence of the supply structure in terms of house size with the markets of northern European countries (Sweden, the Netherlands). Slightly different is the structure of the market in Germany, where by far the larger houses – from 150 to 300 square meters – have definitely greater share. For obvious reasons, the markets of France or southern European countries are also quite different, with a characteristic large segment of houses exceeding 300 square meters.

CHART 5. CHART 4. SINGLE-FAMILY HOUSES MARKET STRUCTURE IN POLAND IN TERMS OF THE AGE OF THE HOUSE IN 2021

source: own study/AMRON

Despite this convergence, which may theoretically indicate a certain maturity of the market and its participants, it cannot be assumed that the pace of change in the single-family home market will slow down. In view of the current and expected social and economic changes in the market environment, it seems more likely that they will even accelerate, both in terms of house size and quality. Rising energy costs will certainly cause the heating bill to be an even more important argument for taking the decision to purchase a single-family house.

Jerzy Ptaszyński
Research and Market Service Director