AMRON-SARFiN Report 1/2015

Unfortunately, the latest results do not breach the downward trend in the scale of lending in the banking sector, which has lasted for over more than eight years now. In this case seasonality effect, occurring also in the previous years is significant. According to this effect, in each case the results of first quarter are lower  than the results of the last quarter of the previous year. Fortunately, this year’s decrease was negligible, less than 2%. Both, the number (42.2 thousand), and the value (PLN 8.9 billion) of newly granted loans in Q1 2015 can constitute good foundation for improvement in the future quarters. But can we count on this improvement?

Neither exceptionally low  PLN loan interest rates, nor attractive prices convinced buyers to take out long-term mortgage loans. Opportunity to purchase on the housing market – with low prices and the increasing range of dwellings – was used by those, who had cash or who withdrew their savings from bank deposits or other financial instruments and invested in dwellings earmarked for lease as  lease profitability definitely exceeded  payoffs offered by financial institutions. Buyers however were not able to take out all newly introduced dwellings from the market. A consequence the supply on the primary market increased again. Despite concern about this fact, developers introduce new investments on the market, trying to head off potential negative effects of the developer’s act  toughening.

In accordance with the principle of seasonality, the number of constructions completed in Q1 2015 decreased by 26% in relation to 2014 and amounted to 31 817 dwellings. In the case of the number of started constructions (31 809 constructions),and the number of building permits issued (38 447 constructions), there were noted slight changes, respectively a decrease and increase by 5%.

Since 2011, transaction prices in the biggest Polish cities have slightly fluctuated. On an annual basis (Q1 2015/Q1 2014) there was noted a decrease of average transaction price in two of all analyzed cities: in Cracow (by 82 PLN/sq.m.) and in Gdansk (by 58 PLN/sq.m.), while in Warsaw and Bialystok prices remained at the same level as in 2014.  In remaining cities, the average transaction prices per 1 sq.m. increased in relation to Q1 2014. The largest increase was noted in Katowice, while in Poznan, Lodz and Wroclaw average transaction prices increased respectively by 166, 161 and 39 PLN/sq.m.

This confirms our thesis from the previous Report  on a kind of ‘testing’ of the local markets’ readiness to accept prices increases. However, in AMRON Centre’s opinion there is no justification for such a scenario in the near future. There is no argument allowing to predict an increase in housing lending. It is hard to expect an increase of funds from the capital market on housing investment. Decrease in funding of housing investments in Poland by our economic emigration is also worth mentioning. According to the most recent surveys of National Bank of Poland, there are more and more emigrants, who abandon plans of a rapid return and begin to organize their lives in exile. This attitude will not be changed also by what was said during the presidential campaign – the housing policy was practically omitted. Learning lessons from the results of the presidential election, Polish Banks Association may no longer witness the omission policy of Polish government and parliament in the sphere of housing finance. For several years we unsuccessfully promote system solutions proven in many countries.

Another election campaign is getting close – parliamentary elections. As a banking sector’s chamber of commerce we have already started a discussion on the future system solutions in the area of housing finance, which should be based on two pillars of finance – mortgage banks and building societies. The agenda of the Housing Finance Congress organized by Polish Banks Association and AMRON Centre on November 26-27, 2015, includes the debate on housing policy that should be completed with the adoption of Housing Programme for 2016-2030. We look forward to your suggestions, which should be the subject of this debate, as well as declarations of participation in the Congress and the debate. We hope that the winners of October’s elections will participate in the Congress and will be ready to create a new order of housing.

Jacek Furga
Head of AMRON Centre

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