AMRON-SARFiN Report 2/2019

The situation on housing market is getting to be interesting. For several quarters, analysts and market observers have predicted that the number of construction permits issued and dwellings completed by developers ware to steadily decrease and developers’ sale results would be weaker. And market seemed to confirm that predictions. On the other hand, banks began to be more cautious about housing lending and therefore a slight increase in loan margin was noted. Dwellings prices also increased but it was not the result of limited supply. And now, in the middle of summer, despite the holiday season, housing market caught a second wind, perhaps due to unprecedented heat.

The results of banks’ lending activity in Q2 2019 were the highest in 42 quarters. The value of new loans amounted to PLN 16.5 billion and reached the level of Q3 2008 – the last quarter before the subprime crisis reached Poland! The number of loans granted was also record-breaking – 59 thousand loans, which was the highest in 31 quarters. But in Q3 2011, total value of new loans was by 22% lower and amounted to PLN 12.77 billion. This shows how much the average value of housing loan increased over those 8 years, which resulted from increasing housing prices, but ensured by increasing salaries.

On the other hand, according to NBP’s data, more and more people decide to buy an apartment for cash. The percentage of customers buying dwellings on primary market without a loan has already exceeded 50%. The reasons for the increase in the number of cash transactions on the housing market are lower interest rates and rising inflation. What is more, according to President of NBP, further interest rate cuts are possible.

The construction market also surprised. The increase in the number of construction permits issued in Q2 2019 amounted to almost 25% comparing to the previous quarter and it was the best result since the beginning of statistics recorded by Central Statistical Office. The number of constructions started increased in the period from April to June by almost 15%, while the number of dwellings completed remained at the level from the previous quarter. In the first half of 2019, developers competed 58 765 dwellings, i.e. by 22.06% more than in the same period last year.

The number of transactions was diminishing, but prices were increasing. Developers seem not to be troubled, as sales results were satisfying. The decrease in supply mainly resulted from lack of building plots and construction workers. In Q2 2019, an average transaction price of 1 sq.m. of floor area was higher than the value recorded in the previous quarter in all analysed locations. The highest increase was recorded in Katowice agglomeration – by 6.34% and in Lodz – by 6.29%.

The prices increase resulted in decrease in the average floor area of purchased dwellings to 53 sq.m. The largest apartments were traded in Wroclaw, where the average area of the premises was 56.72 sq.m. The largest apartments were traded in Wroclaw, where the average floor area accounted for 56.72 sq.m., while the lowest average floor area of dwellings was recorded in Cracow (50.01 sq.m.).

Is the recovery on the housing market in Q2 2019 was just a last-minute effect, or was it a players mobilization in extra game time? The next quarter will provide the answers. It is difficult to forecast the results of banks’ lending activity at the end of 2019 at the moment. My forecast from three months ago that the volume of this year’s lending will be higher than a year ago is confirmed, but the surplus scale may be surprising! I did not believe, however, that it would be possible to repeat the number of loans granted a year ago. One more such quarter and my faith in this area may suffer.

The parliamentary elections are approaching, so it is worth summarizing the effects of the housing policy of the last four years. The number of dwellings completed under the ‘Flat Plus’ Programme is disappointing. However, the effects of the government’s promotion of housing for rent are noticeable. The market is developing very well. Over the last four years, market rents for dwellings increased by 33% in Lodz, by 27% in Wroclaw, by 26% in Warsaw and Gdansk, and by over 8% in Cracow and Poznan. These increases were, among others, the result of transaction prices increases, which in the last four years ranged from 34% in Gdansk to 15% in Warsaw. This is a really good change, but only for those, who purchased flats for their own needs or for rent, just after announcing the assumptions for the ‘Flat Plus’ Programme in January 2016.

Jacek Furga,Ph.D.
Head of AMRON Centre

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