AMRON-SARFiN Report 3/2023

After the collapse of mortgage lending in the second half of 2022, we have been observing an increase in lending since the beginning of this year, which has accelerated in the third quarter of this year only as a result of the government’s ‘2% Safe Loan’ programme. However, it is definitely too early for the commonly held opinion about the lending boom.

The number of housing loans granted in Q3 2023 accounted for 40 749, which was by 32.31% more in comparison to the previous quarter. The value of newly granted mortgage loans amounted to PLN 15.843 billion, which meant an increase by PLN 4 543 million, i.e. 40.20% more in comparison to the second quarter of this year.

In comparison to the same period last year (Q3 2022), 19 531 (by 92.05%) more loan agreements were concluded and their value was higher by PLN 8.835 billion (126.09%). However, the scale of mortgage lending remained at a relatively low level, and the high growth dynamics was primarily due to the base effect, i.e. very poor results of 2022.

This recovery of housing loans market, apart from the obvious impact of the ‘2% Safe Loan’ programme, was also influenced by the Monetary Policy Council, which in September this year, for the first time in 38 months, significantly reduced the NBP interest rates, including the NBP reference rate from 6.75% to 6.00%. What is even more important, the WIBOR 3M index decreased from the maximum level of 7.59% in November 2022 to 5.72% at the end of the analysed period. Decisions about taking out a housing loan were supported by reports from the President of the National Bank of Poland about the reversal of the upward trend in inflation. Moreover, despite the high loan costs, people were encouraged to purchase a flat due to the rapid increase in transaction prices and the significantly decreasing stock of flats available on the market.

Despite a significant improvement in banks’ lending activity in the third quarter of this year, this was another, seventh in a row quarter of decrease in the portfolio of active housing loans. This meant that repayments of active housing loans were still higher than the new loans. As for September 30 this year, the total number of active housing loan agreements in Poland amounted to 2 291 661. This meant a decrease by over 10%, i.e. nominally by 256 899 loans, in comparison to the record level at the end of 2021.

The total value of Polish households debt due to granted housing loans at the end of Q3 2023 amounted to PLN 482.661 billion, compared to PLN 511.265 billion at the end of 2021, which meant a decrease by 5.5%.

Such a large discrepancy between the decline in the number and value of the housing loan portfolio resulted from a dynamic increase in the average value of newly granted loans. The average value of a housing loan granted in PLN in the third quarter of 2023 amounted to PLN 388 679, while for loans granted under the ‘2% Safe Loan’ programme it accounted for PLN 393 400.

The increasing banks’ lending activity resulted in an increase in investor activity on the housing market in the third quarter of 2023, which was confirmed by growth in the number of constructions started by 13.31% and a rise in the number of dwellings, for construction of which a building permit was issued by 4.01%. Unfortunately, the number of dwellings completed was lower. In the third quarter of this year developers completed 32 475 apartments, which was by 4.67% less than in the previous quarter and as much as 10.67% less than a year ago.

In the third quarter of this year, dynamic increases in apartment prices were recorded in all analysed locations. The main factor stimulating the demand for dwellings and prices spike was the entry into force of the ‘2% Safe Loan’ programme when supply of dwellings was limited and decreasing. Growths in prices were noted on both primary and secondary markets, and interestingly, in cities analysed by the AMRON Centre, the rises on secondary market was higher than that recorded on primary market.

The highest increase in the average transaction price in Q3 2023 was recorded in Poznan – 9.31%. Slightly lower increases were recorded in Wroclaw (by 8.89%) and Cracow (by 8.14%). The average price of a square meter of dwelling in Warsaw amounted to PLN 12 988/sqm and was higher than the quarter before by 7.91%. In Gdansk, an increase in the average price accounted for 7.89%, while the lowest price dynamics was recorded in Lodz – an increase by 4.75%, up to PLN 6 995/sqm.

In comparison to the corresponding period of 2022, the highest leaps in the average price of apartments were recorded in Warsaw (by 13.93%) and Cracow (by 13.51%), while the lowest rise rate was recorded in Lodz (by 8.57%). We already informed about this expected consequence of the introduction of the ‘2% Safe Loan’ programme in the previous AMRON-SARFiN Report, when the media was full of declarations by the programme’s authors that it would not have an impact on the housing prices. Apart from the disproportion between demand and supply on the housing market, an important cause for the price increase was also the adjustment of the offer prices of apartments to the loan limits applicable in the programme, observed both on the primary and secondary markets. In addition to the disparity between demand and supply on the housing market, the adjustment of offer prices of flats to the loan limits applicable in the programme, observed both on primary and secondary markets, also played a significant role.

On the rental market, the third quarter of 2023 traditionally brought a seasonal spike in demand, especially from students, as well as an increase in the supply of dwellings for rent. As a result, small changes in rent rates on most analysed markets were recorded. Lodz was the only city, where decrease (by 1.06%) in relation to the previous quarter was noted.

The highest increase was recorded in Gdansk – by 2.17%. Rents grew slower in Warsaw – by 1.07) and in Wroclaw – by 0.48%, while in other large agglomerations the rises amounted to approximately 1.3%.

The huge interest in housing loans with government subsidy in the second half of 2023 has resulted in forecasted banks’ lending activity exceeding the disastrous results of 2022. The number of new loans granted in the whole 2023 may reach the level of 160 thousand, while 126 thousand of loans were granted in 2022. It should be noted that this level of loan activity hasn’t been seen since 2004, which was over 20 years ago. Furthermore, the total value of loans granted in 2023 may even reach PLN 60 billion, while in 2022 it was PLN 43 billion.

The results of the parliamentary elections and the upcoming change of government raise questions about the future of the ‘2% Safe Loan’ programme. According to the AMRON Centre, considering the projected number of loans granted under this programme, no later than February 2024 the Bank Gospodarstwa Krajowego will be forced to announce the suspension of new housing loans applications. The funds allocated for subsidies in this programme for the years 2023 and 2024 are already running out.

The Polish Banks Association actively participates in ongoing debates and consultations aimed at developing proposals and recommendations to enhance the efficiency of the Polish banking sector, for the benefit of the Polish economy. This includes proposals for financing the development of housing construction sector, both in terms of demand and supply. An opportunity to implement responsible, systemic actions in this area based on the provisions of the coalition agreement can be seen. The reversal of the long-standing atmosphere of general doubt about long-term agreements between borrowers and banks, which poses the greatest threat to the stability of the Polish financial system, is a fundamental issue, not only for the banking sector. It is the duty of the government to interrupt this process. On our part, we propose participation in the process of constructing long-term, systemic solutions to create a new housing loan market. We propose verified solutions and financial instruments that provide significantly more effective housing security for citizens in neighbouring countries.

Jacek Furga,Ph.D.
Head of AMRON Centre

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