AMRON-SARFiN Report 1/2020

In Q1 2020, once again, a slight increase in sale of new housing loans was noted in comparison to the previous quarter, both in terms of number and value. In this period, banks in Poland concluded 56 453 housing loan agreements, i.e. by 1.82% more than in the previous quarter. The total value of newly granted mortgage loans accounted for PLN 16.623 billion, which meant an increase by 5.78%. This good results were noted despite the ‘freeze’ of the Polish housing and loan market in mid-March 2020. In comparison to the same period of 2019, in Q1 2020 the number of newly granted housing loans increased by 11.57%, while total value was higher by 22.26%. The average value of housing loan in Q1 2020 amounted to PLN 293 833, which was more by almost 4% in relation to Q1 2019, and in April it exceeded PLN 300 thousand.

On the other hand, the slowdown on the housing market was noticed. For reasons we have already discussed several times in previous reports, the number of constructions started decreased both in relation to the results from Q4 and Q1 2019. The number of construction permits issued and dwellings completed in Q1 2020 were significantly lower than in the previous quarter, but in comparison to the corresponding period of 2019 increases by 3 – 4% were noted. This situation does not give a chance for prices reduction. Besides, developers’ current production is sold out in more than half for the next year and a half.

In Q1 2020, the average transaction price per 1 sqm of dwelling continued to increase, from less than 3% in the largest agglomerations to almost 7% in Katowice agglomeration. In the capital city, the average transaction price in Q1 2020 amounted to PLN 9 228/ sqm and it was higher by 2.29% in relation to the previous quarter. However, in comparison to Q1 2019, the price increases were impressive – from almost 12% in Warsaw to over 25% in Katowice agglomeration and in Lodz. The price reduction may occur in 2021, mainly due to the entry into the offer of new investments, mostly built in a lower standard and less prestigious locations.

Increases in the average rent rate of private dwellings were much lower in Q1 2020, not exceeding 2% in relation to the previous quarter and 5% in relation to Q1 2019. In Warsaw, however, this increase amounted to 5.82%.

Now let’s get back to the coronavirus and its effect on the housing market. What awaits us in 2020? Despite the ‘freezing’ of the housing market in mid-March, sale of housing loans in March was higher than in February by 6.71% in terms of volume and by 9.32% in terms of value, and in comparison to the results of March 2019, increases amounted to 4.86% and 16,09%, respectively. However, effects of the pandemic were clearly visible in April and resulted in a decrease in both the number and value of housing loans granted by one-fifth in relation to March. One of the reasons for the decrease in banks’ lending activity could have been the restrictive requirement of 20% of the minimum own contribution introduced by all banks, and in some banks this requirement amounted to even 40%. Some banks used the reduction of interest rates by the Monetary Policy Council to increase the loan margin.

The pandemic resulted in a decrease of transactions’ number on the housing market, but this was mainly an effect of restrictions of personal mobility. A decrease in the number of transactions decreased by approx. 50%. This particularly affected secondary market because developers have moved part of the sales process to the Internet. The problem was however arranging a date with a notary. Some offices were closed and others shortened working hours, so it may mean that those interested in purchasing the flat did not cancelled shopping, only postponed it.

The significant impact of coronavirus on the long-term rental market was not yet apparent. However, this is due to the fact that spring months are not a period of high activity on the rental market. We will have to wait for the effects until traditionally the most active period on this market, i.e. September. The lower availability of housing loans should cause greater interest in renting. According to market analysts, in the scale of the whole market, rent rates should not decrease significantly and rather quickly return to the upward trend.

The coronavirus pandemic brought uncertainty and anticipation on the housing market. Today, it is impossible to answer the question about the future. To create such forecasts you need current, reliable data on what is happening on the real estate market. That is why I invite developers, real estate agents, property appraisers and other real estate market participants to cooperate directly with AMRON Centre.

I would like to emphasize very good cooperation between the banking sector and developers. Polish Banks Association together with Polish Association of Developers, organizes regular webinars with the participation of 70-80 representatives of banks and developers, where we discuss problems and ways of solving them on an ongoing basis. We also exchange opinions and numbers regarding the current situation on the housing market.

For several years after the previous crisis on the real estate market, we have used the concept of ‘organic level of lending’ in Poland. Regardless of whether governments launched a housing programmes or not, the banking sector generated at least 180 thousand housing loans each year for a total amount around PLN 40 billion. It is difficult to assess at the moment how long the current ‘freezing’ of the economy will last, but I am convinced that the results of this year’s banks’ lending activity, despite the disturbances caused by coronavirus, will be definitely higher than this organic level.

Jacek Furga,Ph.D.
Head of AMRON Centre

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