AMRON-SARFiN Report 4/2018

Most observers and analysts were surprised by the results on both housing and loan markets in 2018. Everyone was counting on continuation of positive trends, but the results at the level of those from the period before the last crisis started concerns about the near future of the housing market, in particular the risk of the housing transaction prices collapse.

In 2018, 212 596 new housing loans with a total value of PLN 53.852 billion were granted in Poland, which was more respectively by almost 12% and 21% in comparison to the previous year. This meant that the results of banks’ lending activity in the previous year were the best since 2011 in terms of number, while in terms of value it was the third result in history after the year 2007 and 2008. The AMRON Centre forecast announcing a lending result in 2018 at a level exceeding 200 thousands of active loans with a total amount of over PLN 50 billion was fulfilled. At the end of 2018, total number of active housing loans amounted to 2 246 296 and total value of households debt due to active housing loans accounted for PLN 415.158 billion.

In 2018, as in previous years, the situation on real estate and housing loans markets resulted from the good economic situation in Poland, rising wages and incomes’ increasing purchasing power, as well as historically low NBP’s interest rates, maintaining the low level of housing loans costs and encouraging private investors to look for other options than bank deposits to invest their savings.

In 2018 another record-breaking results on the housing market were recorded. 184 783 dwellings were completed, the construction of 221 907 dwellings was started and permits for construction 257 072 apartments were issued. Even in 2007 – 2008, such good results were not noted. All this despite the same barriers as occurred in the previous year – a systematic and dynamic increase in the prices of building plots and growing costs of housing construction, both in terms of materials and labour.

Housing prices continued to increase. Throughout 2018, the growth rate of average housing prices was, however, diversified and in most of analysed cities clearly slowed down in its second half. Among the major Polish agglomerations, the largest increase was recorded in Gdansk, where the average price per 1 sq.m. of dwelling was in Q4 2018 higher by 10.49% than a year earlier.

What can be expected in 2019 on the housing market? Three years after publication of the National Housing Programme, the slogan ‘Flat Plus’ has become less frequent both in media and in politicians’ statements . It is very unfortunate that proposals of alternative solutions presented by Polish Banks Association for three years did not attract any interest from the government.

Decrease in sales on housing market confirms that after the experience of the previous crisis, developers try not to heat up the situation, but calmly distribute and introduce new dwellings on the market, not in such a number and not as fast as they used to do. Therefore, prices are stabilizing and investors are holding out on purchases and wait for declines. A drop in demand is also noticeable. Thus, a slowdown in price growth may be expected or perhaps even a slight price correction in 2019, what would be good this market.

Unless we are facing dynamic political changes in the coming months, including regulatory and economic changes on the housing market, the situation should be shaped primarily by the economic slowdown (which will affect the demand for housing) and rising production costs on the supply side, resulting from the planned new regulations and the situation on building plots market, as well as the construction sector’s standing. 2019 will probably be the most difficult period for developers compared to few last years. In the largest Polish agglomerations, a weakening dynamics of housing prices increases and a further lowering of trade volumes may be recorded. Also banks were signalling a slight tightening of lending policies in the housing loans segment, whilst at the moment the banks’ pricing policies seem not to confirm it.

Anyway, repetition of last year’s results in 2019 is rather improbable, both in scope of new housing investments and banks’ lending activity. Will we ever hear about the ‘Flat Plus’ Programme? I leave this question open.

Jacek Furga,Ph.D.
Head of AMRON Centre

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