AMRON-SARFiN Report 4/2017

Keeping interest rates at historically low level led some people to withdraw savings from bank deposits and to invest in dwellings for rent, while others were encouraged to take out a mortgage loan for buying a flat. The effect could only be one – 2017 turned out to be a record-breaking year both on the housing market and mortgage loans market. In 2017, banks granted over 190 thousand housing loans for a total amount of PLN 44 billion, which meant the best result of the banking sector for six years. More than a year ago, there was no sign of such an increase in banks’ lending activity, but the results of the first quarter of 2017 have forced to increase the forecasted results. These forecasts were also exceeded.

It was the third record-breaking year of dwellings sales by developers. A high demand for flats was due to a low profitability of bank deposits combined with uncertainty about other forms of investment. That’s why many Poles decided to invest funds in real estate. The market was also driven by the government’s ‘Flat for Youth’ Programme and announcement of its ending, which meant that some buyers stopped postponing the decision to buy a dwelling, wishing to benefit from government subsidies under the ‘MdM’ Programme. This resulted in developers’ extraordinary sales results, encouraging them to start new investments. In 2017, a new record-breaking result on housing market was noted – 178 258 new dwellings were built, which was by 9.1% more than in 2016. Construction of 205 990 dwellings was also started (by 18.4% more comparing to the previous year) and building permits for a further 250 218 apartments were issued (more by 18.3%). These were the best results since 2008.

The number of new building permits and started investments guarantees an interesting housing offer in 2018. Such developers’ flexibility in satisfying the growing appetites of potential buyers will maintain the trend of systematic price increase recorded since the beginning of 2013 and will ensure stability on real estate market. The predictions of a soon correction of housing prices, propounded by some market analysts, seem to be unjustified.

The President of NBP confirmed that interest rates will remain unchanged until the end of this year so nothing should cool down the appetite of potential borrowers. However, the inevitable – at the latest in Q2 2019 – increase of interest rates may paradoxically motivate potential borrowers to take out a loan this year. January has already started with a strong accent of exhaustion of the last pool of funds for subsidies under the ‘Flat for Youth’ Programme. In less than two days, the last pool of funds was distributed in the amount of PLN 381 million, which was enough for payments for 12.7 thousand borrowers, although there were many more applicants. Most of those, for whom money was not available, will most likely complement their downpayment and stand in the queue for a loan without a subsidy.

2018 may bring results at a similar level as the previous year, i.e. about 190 thousand of housing loans with a total amount of PLN 45 billion.

Two years after the publication of the National Housing Programme, the authors of the Programme are starting to talk about unrealistic assumptions and the need to modify them. It is a pity that for two years the critical comments and suggestions of alternative solutions signalled by the Polish Banks Association did not receive any interest from the government. Establishing the Housing Council was welcomed by the Polish Banks Association as a chance for a new opening and in the first days of February this year the President of the Polish Banks Association proposed to the Prime Minister and the Chairman of the Housing Council an offer to include the banking sector in works on modifications of the National Housing Programme.

Jacek Furga,Ph.D.
Head of AMRON Centre

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