2% Safe Loan and its impact on real estate prices in Poland

At the end of May 2023, Polish parliament completed work on the Act on state aid in saving for housing purposes. The act is in force since July 1, 2023 and introduces a new programme called First Apartment. One of the basics of this programme is a new form of credit – 2% Safe Loan, which is available in a few banks since July 3, 2023. According to BGK (pol. Bank Gospodarstwa Krajowego – the managing entity) these are currently: PKO Bank Polski S.A., Bank Pekao S.A., Alior Bank S.A., VeloBank S.A., SGB Bank S.A., Bank BPS S.A. and cooperative banks of the BPS Association, Bank Spółdzielczy Rzemiosła in Cracow and Bank Spółdzielczy in Brodnica.

2% Safe Loan – assumptions

As part of the obtained 2% Safe Loan, the borrower is guaranteed a loan with a fixed base rate of 2%. According to the assumptions, the programme provides subsidies to the loan for the first 10 years, so that the base rate in this period won’t be higher than the aforementioned 2%. In other words, the subsidy will be the difference between the fixed rate determined on the basis of the average interest rate on loans with a fixed rate at lending banks, and the interest rate on the loan at the rate of 2%. Crediting banks add their margin to the base rate.

To be able to apply for a 2% Safe Loan, borrowers must meet several conditions:

• on the date of submitting the application, the borrower must be younger than 45 years old (in case of married couples it concerns at least one of spouses),
• the programme is addressed to people who buy or build their first apartment or house (applies to both spouses in the case of married couples) – the programme cannot be used by people who already own any housing real estate,
• real estate can be purchased both on the secondary and primary market, and a loan can also be granted for the purchase of a plot and construction of a house (on this plot),
• there are no price limits per square meter of purchased real estate,
• the maximum loan amount is PLN 500 000 for a single person and PLN 600 000 for married couples or parents with a child, to use the above maximum loan amounts, borrowers must have a net income of:
  by PLN 7 – 8 thousand per month – for a single person,
  by PLN 9 – 10 thousand per month – for married couples or parents with a child,
• own contribution may not exceed PLN 200 000.

Becoming a borrower of the 2% Safe Loan, borrowers should remember about a few additional aspects so as not to lose the right to subsidies:

• the property must be inhabited within 2 years of purchase,
• the property cannot be sold earlier than after 10 years,
• during the period of receiving subsidies, it is not possible to change the way the property is used or to rent it,
• it is not possible to overpay the loan or fully repay it before the end of 3 years.

It is worth noting that in the offer of banks: PKO BP S.A., Pekao S.A. and Alior Bank S.A. borrowers may not have any own contribution (banks participate in the Loan programme without own contribution).

Therefore, having the maximum possible amounts described in the assumptions, potential borrowers can look for apartments in the price ranges of up to PLN 700 000 – 800 000. This seems to be an amount that gives a wide range of real estate choices on the market, even in the largest agglomerations. However, after launching the programme, do we really have the same pool of available apartments in the indicated price range to choose from?

Has the launch of the 2% Safe Loan affected real estate prices?

During the works on formulating the 2% Safe Loan assumptions, many experts and real estate market analysts were sceptical about this programme. It was a common opinion that the introduction of such a form of credit would increase the offer prices of real estate. Demand for housing will increase due to better availability of housing loans for a wide range of people, while the supply of real estate will not increase, which will be the main reason for the prices increase on the market. The closer the launch of the programme, the more visible was its impact on prices. It is shown by analyses of changes in offer prices available on the Internet. Since the announcement of the programme in mid-December 2022, real estate prices have been increasing month by month. The chart below shows how the average offer prices of apartments in Warsaw change nowadays.

PICTURE 1. CHANGES IN THE AVERAGE OFFER PRICES OF FLATS IN WARSAW

source: https://zametr.pl/ceny-mieszkan/warszawa (access: 25.07.2023)

In Warsaw, the increase in prices has been noticeable since December 2022. Offer prices began to increase even faster from March 2023 and currently, both on the secondary and primary markets, they average around PLN 16 000/sqm. In mid-December, the average unit price was around PLN 14 500/sqm. This is an increase of as much as 10% in just 6 months. The phenomenon is also confirmed by the analysis of the number of offers with a price change.

PICTURE 2. NUMBER OF OFFERS WITH PRICE CHANGES ON THE WARSAW REAL ESTATE MARKET

source: https://zametr.pl/ceny-mieszkan/warszawa (access: 25.07.2023)

Since December 2022, there have been less and less decreases in offer prices on advertising portals, with a simultaneous increase in the number of more expensive offers. Until recently, we could notice a significant advantage of advertisements for cheaper flats. Last year, from month to month, there were fewer and fewer offers with increasing prices. Currently, there is a much smaller number of offers with price decreases (only 520 in July), and slightly more offers with price increases than in recent months (481 in July). Both values are currently at a similar level. Such situation wasn’t experienced even once since the end of 2021. Is the situation similar on other large markets in Poland? An analysis of the situation on the housing market in Cracow and Gdansk is presented below.

PICTURE 3. CHANGES IN THE AVERAGE OFFER PRICES OF FLATS IN CRACOW

source: https://zametr.pl/ceny-mieszkan/krak%C3%B3w (access: 25.07.2023)

PICTURE 4. NUMBER OF OFFERS WITH PRICE CHANGES ON THE CRACOW REAL ESTATE MARKET

source: https://zametr.pl/ceny-mieszkan/krak%C3%B3w (access: 25.07.2023)

The two charts above show the situation on the housing market in Cracow. The impact of the announcement of 2% Safe Loan in December 2022 is reflected in both changes in average apartment prices and the number of offers with a price change. Half a year ago, the average price of an apartment in Cracow, both on the primary and secondary markets, was PLN 12 500/ sqm. Currently (July 2023), these prices have increased to PLN 14 000/ sqm on the primary market and PLN 14 500/ sqm on the secondary market. Since March 2023, the number of adverts with price increases on advertising portals exceeds the number of adverts with decreases in apartment prices. Much more often in recent months, apartments have become more expensive than cheaper.

PICTURE 5. CHANGES IN THE AVERAGE OFFER PRICES OF FLATS IN GDANSK

source: https://zametr.pl/ceny-mieszkan/gda%C5%84sk (access: 25.07.2023)

PICTURE 6. NUMBER OF OFFERS WITH PRICE CHANGES ON THE GDANSK REAL ESTATE MARKET

source: https://zametr.pl/ceny-mieszkan/gda%C5%84sk (access: 25.07.2023)

On the real estate market in Gdansk, similar tendencies as in Warsaw and Kraków can be observed, although slightly less dynamic. The average offer price of flats between December 2022 and July 2023 increased by 8% on the primary market and 5% on the secondary market. As in the two largest Polish cities, the number of offers with decreasing real estate prices is also declining in Gdansk.

The quoted data directly show that the 2% Safe Loan, the goal of which is to support the way to owning an own apartment, has significantly changed the real estate market in a way that limits the pool of apartments available on the market. In the last 6 months, prices of flats increased much faster than before the announcement of the new loan programme. When browsing real estate offers on advertising portals, it can also be noticed that the percentage of offers in the price range of PLN 700 000 – 800 000 (the maximum possible value of funds at the disposal of the borrowers of 2% Safe Loan) has increased significantly. Therefore, we can see how the market is adjusting to the new credit conditions.

Summary

2% Safe Loan is the next programme, which proves that this type of government action, theoretically supporting the creditworthiness of Poles, primarily causes an increase in demand for housing. Sellers take advantage of this phenomenon by increasing the offer prices of flats. Only the programme’s beneficiaries, i.e. borrowers of the 2% Safe Loan, will benefit from it, while for the remaining, overwhelming group of buyers (those who do not meet the conditions for obtaining such a loan), the possibility of buying their own apartment again becomes more distant.

Barbara Mariańska
Maintenance and Development Specialist