AMRON-SARFiN Report 1/2011

Banks’ lending figures for Q1 2011, both in terms of number (57,578) and value of granted loans (PLN 12.252 billion), are comparable to the results of Q4 2010. However, while summarizing the results of last year’s Q4 I highlighted a surprisingly low result, a similar result in the first quarter of this year can be unambiguously assessed as a sign of returning prosperity on the loan market. Such mutually opposing assessments of the same result in consecutive quarters are justified by the cyclical nature of the Polish market related to the seasons of the year. Without further explanations on this issue, you are referred to charts exhibiting quarterly changes in the number and value of mortgage loans.

Figures for Q1 2011 allow for moderate optimism and justify the conclusion that lending volumes in 2011 will be greater than in 2010, but still not exceeding PLN 60 billion. This is despite the fact that a new version of Recommendation S has been adopted on 25th January this year, which definitely tightens mortgage lending criteria. Moreover, not without significance for the results of subsequent quarters will be the final decision of the Polish Parliament on amendments to the “Family on Its Own” government programme.

The signals from the housing market are more difficult to interpret. In Q1 2011, the construction of 30,952 dwellings was commenced in Poland, which makes an increase of 13.6% on the corresponding period of 2010. This increase was brought about by the activity of both real estate development companies – in this period real estate development companies started the construction of 13,215 housing units (14.5% up) – and self-builders, who started the construction of 16,450 units, which is 16.6% more than in the corresponding period of 2010.

On the other hand, according to the Central Statistical Office data, 12,768 housing units were completed in Q1 2011, which is 18.4% less than in Q1 2009. A downward trend of the number of dwellings completed can be observed among both real estate development companies and self-builders. What has increased is the number of permits issued for construction of housing units, which reached 37,266, i.e. by 27% more than the number of building permits issued during the corresponding period of 2010.

Q1 2011 brought the subsequent, steady but rather symbolic (PLN 50 to 100 per square meter of the floor area) decrease in average prices in most major housing markets. One exception was the housing market of Gdansk, where prices rose by about PLN 100 per square meter.

Summarising the activity of real estate development companies that guarantees a surplus of supply over demand in the primary market, it can be concluded that for the moment housing prices are not likely to rise. Particularly when taking into account the fact that the cycle of increases in basic interest rates started by the Monetary Policy Council will – regardless of the effect of regulation – additionally discourage potential buyers from financing the transaction with mortgage loan. Indeed, the number of housing purchase transactions without bank loans has recently increased in the real estate market.

Jacek Furga
Head of AMRON Centre

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