AMRON-SARFiN Report 4/2012

The year 2012 was not a typical year at housing market. Market players’ performance was determined by several changes in legal regulations, previously announced by the government and finally accepted by the Parliament. In purpose to omit the obligatory trust accounts enforced by the Act on protecting rights of housing unit or single-family house purchasers, which came into force on April 29, 2012, in first quarter of the year developers entered into market most of planned investments. According to Central Statistical Office, number of housing units completed in Q1 2012 increased by more than 32% comparing to the number noted in Q1 2011. As for the end of 2012, number of dwellings offered by developers on primary market amounted to over 54 thousands of units.

In Q4 2012, the above-average increased activity of potential borrowers, who eagered to benefit from terminating „Family on Its Own” Programme was observed. Number of loans granted under the Programme in Q4 2012 was the highest ever, and amounted to 15 828 loans,  41.46% more than in Q3 2012 (in terms of value it was 39.62% more than in previous quarter). In addition, as for the end of December there was over 26 thousands of new loan applications registered in banks and waiting for being proceeded.

After completing the desciption of current situation with Financial Supervision Authority’s announcements on changes in mortgage lending rules, the diagnosis seems to be quite obvious – it was not a good year for Polish construction and housing market. Legal changes, increasing anxiety among potential purchasers evoked by pesimistic economic forecasts, increasing unemployment and lack of governmental long-term strategies and programmes supporting housing development resulted in final 2012 outcome weaker than prognosed.

In 2012, the total value of new loans portfolio was 20% lower than the value of loans granted in 2011 – in terms of value it amounted to PLN 39.1 billion. Such a result was a concequence of lower (by almost 15%) number of newly granted loans, but also – almost 7% decrease of the new loan average value . Despite the decreases mentioned above, the total number of active housing loans increased up to the number of 1.732 Mio, while the value of total housing loans portfiolio remained unchanged  on the level of PLN 316 billion.

Last quarter of 2012 was already the sixth consequent quarter of the downward trend in the number of granted loans .In Q4 2012 there were 47 523 new loans granted, with the total value of PLN 8.843 billion, i.e. 11% less, comparing to Q3 2012. That was the worst quarterly result since Q1 2009, when the total value of new loans equalled to PLN 7.609billion.

Observation of new housing loans currency structure in a few last quarters allows to give up the detailed anaysis of the new portfolio currency structure in subsequent quarters. While in Q1 2012 currency loans constituted over 15% of the new loans portfolio, in Q4 it was nearly 2.5%. PLN loan definitively rules the market!

Last quarter of 2012 ended with diminished number of constructions started – by 26%, comparing to last quarter of the year 2011. Decrease was also recorded in number of construction permits issued.According to Central Statistical Office, there were 37 155 permits issued in Q4 2012, i.e. 7% less than in Q3 2012 and 13% less than in comparable period of previous year. The only factor (indicator) that increased was the number of housing units completed –, there were 29% more units completed in Q4 2012, comparing to Q3 2012. Generally, most of the housing market indicators appeared to be weaker in 2012 than those recorded in 2009.

Year 2012 was already the fifth year of continous decrease of the housing units average transaction prices at (on) the greatest housing markets.The average transaction price in Warsaw, as for the end of December, amounted to PLN 7 134 per sq.m., i.e. PLN 199 less comparing to September 2012 and PLN 522 less comparing to December 2011. In 2012, the greatest decrease in transaction prices – by PLN 663 per sq.m. was recorded in Krakow. Prices decrease resulted from systematic supply growth, observed since the second half of 2010, as well as from resirictions in banks’ mortgage lending policies.

Considering the aforementioned data and supplementing it with common conviction that 2013 is going to be the  period of the deepest  depression in Polish economy, forecasts of further, though slower than in 2012, decrease in housing prices until 2014 seems to be justifiable.

Reality of 2012 was much worse than we have prognosed in the most pesimistic prediction. Not only the forecasted result of mortgage lending (200 thousand of loans of a total value of PLN 42 billion) but  even the level of PLN 40 billion turned out to be unreachable. Actual results of the year 2012 were the weakest since the crisis year 2009 and in some terms ever weaker than those noted in 2009.

Without a prompt government’s resolves and courageous parliament’s decisions taken above political divisions I see no chance for improving the housing market in few years perspective. New governmental programme „Flat for Youth”, as far as now known only in form of draft assumptions, will definitively not be a solution for those pesimistic prognosis. On several occasions Polish Banks Association has provided central institutions with the assesment of the current status of housing market, supplemented with  projects of necessary solutions, particularly in scope of flats rental programme and a system stimulating households to long-timesaving for housing purposes. Long-term state program is the essential condition, necessary for improving either in mortgage lending, or in housing development in general.

Jacek Furga
Head of AMRON Centre

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