AMRON-SARFiN Report 4/2014
The results of the last quarter of 2014 strengthened the downward trend observed since mid-2011, both in terms of the number of new loans, as well as their total value. Thus, as predicted by AMRON Centre – 2014 was the weakest year for the mortgage industry since 2005. Both the number (174 thousand) of granted loans in 2014, as well as their value (PLN 36.8 billion) were lower even than those obtained in the crisis year 2009 (189 thousand for a total amount of PLN 39 billion). Neither the extremely low interest rate of PLN loans, nor the attractive prices did not convince buyers to take out the long-term mortgage loans. Opportunity to purchase on the housing market – with low prices and the growing range of dwellings in the primary market – was used in 2014 by those, who have had a cash or who withdrew their savings from bank deposits or other financial instruments and invested it in dwellings earmarked for lease. Profitability of the lease – especially in Warsaw – definitely exceeded refunds offered by financial institutions. Such situation was a reason for a great satisfaction of developers – sales results recorded in developers’ sector in 2014 were comparable to the results from the years before the crisis, which was in the considerable extend contributed to the government ‘Flat for Youth’ Programme. This optimism of developers resulted in an increase of new construction permits, as well as an increase in the number of new buildings. Slight, only by one percent, decrease concerned completed dwellings – their number in 2014 exceeded 143 thousand.
Transaction prices in the biggest Polish cities for two last years have slightly fluctuated. On an annual basis (Q4 2014/Q4 2013), an increase of the average transaction price was noted in Poznan (by PLN 184 per sq.m.), in Bialystok (by PLN 147 per sq.m.), in Lodz (by PLN 137 per sq.m.) and in Katowice (by PLN 110 per sq.m.). In Warsaw and Cracow, the average price decreased by PLN 82 per sq.m., while in Wroclaw and Gdansk prices remained at the same level as in 2013. Analyzing the price changes in the last few quarters it can be said that in most of the analyzed agglomerations they have achieved their minimum prices and in the next quarters we will witness the slight fluctuations, until a strong market impulse occurs.
For years, Polish Banks Association has monitored the residential mortgage market, what allowed to define the so-called Polish market’s organic ability to generate an annual volume of mortgage loans at the level of at least PLN 38-40 billion, with the number of at least 180-190 thousand mortgage loans granted by the banking sector, regardless of whether the state, in a given year, had supported borrowers or not. The results from the last two years have forced us to revise down this ‘organic’ level of mortgage finance of the housing market.
At the moment, there are no arguments allowing to predict the mortgage lending at the level deviating significantly from what took place in 2013 and 2014. Interest rates are already at the very low level and even their further decrease will not cause significant changes at the level of lending, while an increase of the obligatory minimum level of the own contribution amounting to 10% may impede the access to mortgage loans for those, who currently does not have any savings or who wants to spend it on the renovation of newly purchased dwelling. These are mainly people seeking houses in the lowest prices and some of them can cope with requirement of own contribution by using the government subsidy granted by ‘Flat for Youth’ Programme. Even the declared more attractive state aid in ‘Flat for Youth’ Programme will not affect the increase in the number of loans, because it is not the role of this Programme to generate new borrowers. The Programme is used by those borrowers, who ––anyway would decide to buy a flat on credit and who fulfills the Programme’s conditions. It only remains to count on the fact that an economic recovery observed in the last year and increasing employment will result in increase in investments on the housing market financed by mortgage loans. Unfortunately, after the Swiss National Bank’ decision to release the exchange rate of franc, everyone’s attention is focused solely on finding solutions supporting borrowers indebted in francs. But analysis of loan portfolio does not justify such a commitment of the highest supervisory institutions, as well as regulatory and administrative bodies in this area. I would wish equally decisive actions and courageous decisions beyond political divisions even before new elections are held, resulting in global solutions for housing development in Poland. Otherwise, I cannot see any chance for improvement of a situation on the housing market in the following years. Meanwhile, the housing problems of Polish families are mentioned in many researches and surveys as one of the two main causes of emigration, demographic crisis and dissatisfaction. We lost another year!
Recommended by Polish Banks Association starting of the system of long-term saving on housing purposes have already caused the first media discussion between deputy prime minister of economic affairs and minister of finance. A continuation of this discussion creates an opportunity to accept the idea of Polish Banks Association, and thus an opportunity to boost the housing finance market and improve the housing situation in our country.
Jacek Furga
Head of AMRON Centre
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