AMRON-SARFiN Report 4/2023
Due to the ‘2% Safe Loan’ programme, the mortgage market in 2023 noted much better results than in 2022, the year of mortgage lending collapse. Despite this pre-election housing programme, which significantly improved the situation on housing and the mortgage loan markets, the banking sector achieved results comparable to those from 2004, i.e. 19 years ago. Of course, only in terms of the number of housing loans granted – 162 thousand. The value of lending in 2023 at the level of PLN 62.8 billion was more than four times higher than in 2004, when it amounted to PLN 15.2 billion.
Beside the launch of the ‘2% Safe Loan’ programme, the recovery of housing loans market was also stimulated by the decisions of the Monetary Policy Council. In September 2023, it reduced significantly the NBP reference rate, from 6.75% to 6.00%. A month later it was reduced by another 15 basis points. This resulted in WIBOR 3M decrease from 7.59% in November 2022 to 5.62% at the end of 2023. Despite the high loan costs, people were encouraged to purchase a dwelling by rapid increases in transaction prices, decreasing stock of flats available on the market and reports from the President of the National Bank of Poland about the reversal of the upward trend in inflation. In 2023 banks granted over 100 thousand non-preferential mortgage loans.
Throughout year 2023, banks granted 162 375 new housing loans. In comparison to the results achieved by the sector in the previous year, it was more by 28.55%. In terms of value, the result achieved in 2023 was higher by 43.81% than the total value of loans granted by banks in 2022. The average value of a housing loan (in total) in analysed quarter was higher than that recorded a year earlier by 25.24 %, i.e. nominally by PLN 82 764 and at the end of 2023 amounted to almost PLN 408 thousand. However, despite the increase in the number and value of loans granted, the decline in both the number and the value of the housing mortgage loan portfolio in the banking sector observed since the end of 2021 was not reversed. At the end of 2023, the number of active housing loan agreements in Poland amounted to 2 292 thousand, while the total value of Polish households debt due to granted housing loans accounted for PLN 479 billion. This meant a decline in the number of active loans by over 11%, i.e. nominally by 256 thousand loans in comparison to the end of the record-breaking year 2021 – more loans are still repaid than new ones are taken out.
In the fourth quarter of 2023, developers started construction of 34 328 apartments, which was by 6.47% more than in the previous quarter. The number of apartments for which developers obtained permits during this period amounted to 46 916, which meant an increase by 14.32%. A dynamic increase was recorded in the number of completed apartments – in the fourth quarter it amounted to 39 396 apartments, which was by 21.31% more than in the previous quarter.
In comparison to the results achieved by developers in the fourth quarter of 2022, an increase was noted in the number of apartments for which construction permits were issued – by 13.68%, as well as the number of apartments for which construction has started – by 59.98%. A decline was recorded only in the category of completed apartments. In the fourth quarter of 2023, by 10.36% less apartments were completed than a year before.
The fourth quarter of 2023 brought a continuation of price increases observed in the previous quarter, caused primarily by the entry into force of the ‘2% Safe Loan’ programme. The highest increase in the average transaction price was recorded in the fourth quarter of 2023 in Poznan – 7.43%. Slightly lower price increases were recorded in Wroclaw (by 6.22%) and Cracow (by 6.71%). However, the effect of the increase in transaction prices as a result of the ‘2% Safe Loan’ was visible only on annual terms. As a result of the demand caused by this programme, annual increases in the average price of apartments exceeded 20%, which in Cracow and Wroclaw reached 21.97% and 20.94%, respectively. In Warsaw this increase amounted to 18.18%.
The situation on the apartment rental market was completely different. In the fourth quarter of 2023, a seasonal decline in demand with a simultaneous moderate increase in the offer of apartments for rent was noted. As a result, there was a stabilization and even a slight decline in rent rates on the apartment rental market in Poland’s largest cities. The average rent for an apartment in Warsaw was lower than that recorded a quarter earlier by over 1%. The highest increase in the average rent rate was recorded in Cracow – by 1.73%. However, on annual basis, most monitored markets recorded significantly higher increases in rent rates. The highest dynamics of rents was recorded in Katowice – by 8.83% and Cracow – by 4.16%.
Year 2024 should have brought a significant increase in the creditworthiness of Poles. Dynamically rising wages and falling interest rates – such a future is predicted by today’s available forecasts. Our compatriots will therefore be able to afford further purchases of apartments, both to meet their own housing needs and for rent. They just need a safe legal environment and a bit of encouragement and approval for such actions.
The main challenge for the new government is to take action aimed on strengthening the supply of new apartments. The main problem here is to unblock developers’ access to building land, currently owned by local governments or state-owned companies.
We are ready to discuss effective solutions for housing development in Poland. Everything has already been invented here. It is just a question how to combine these individual ideas into a long-term housing program, instead of starting with handing out money, especially to those who do not need it.
The Polish Banks Association is prepared for serious discussions on long-term solutions, supporting the development of the housing market through responsible financing. In this context, the banking sector expects an end to the government’s imposition of so called credit holidays. The Borrowers Support Fund created by banks has been operating for years and every criteria meeting borrower has the right to benefit from it.
A fundamental issue seems to be abolishing of the common sense of questionability of the provisions of long-term contracts between borrowers and banks that has been built for a few years by the governmental institutions. This is what represent the greatest threat to the stability of the Polish financial system. It is the duty of the government to terminate this process. At this point, it is worth pointing out the need to build a culture of responsibility among potential bank clients for their obligations through a wide-ranging economic education program.
Introducing a balance of rights and obligations between landlords renting out residential properties and tenants by amending of the Tenant Protection Act is also necessary. It cannot be that a tenant who does not pay rent or even damages the rented apartment cannot be removed. This is one of the main barriers to the development of private rental housing, which could solve Poles’ housing problems more effectively than the state. This should also apply to residents of local government housing. According to data from the Statistics Poland, over 45% of apartments owned by municipalities have rent arrears nationwide.
For over a decade, the Polish Banks Association has been consistently presenting to successive ministers responsible for housing ready-made solutions in the form of a long-term savings system for housing purposes in savings and loan associations. We offer a transparent, systemic and universal solution that has been operating successfully for decades in 11 countries of Central and Eastern Europe. In this context, the banking sector generally positively evaluates the Housing Account instrument proposed by the previous government, but it requires changes to arouse wider interest from potential customers.
At the same time, the development of the mortgage bond market, which has been ineffectively built for over 25 years, should be strengthened. Following the example of other EU Member States, we should consistently strive for a housing loan based on a fixed, or in fact periodically fixed interest rate, the condition of which is the development of a compensation model for early repayment acceptable to banks.
Another topic worth recommending is the return, probably for the fourth time, to the discussion on the law regulating the functioning of REITs and encouraging systematic savings in such instruments and taking advantage of the increase in property prices. This may be a generator of another steady stream of funds for housing investments, including stimulating the construction of apartments for rent.
Housing construction can and should be used, following the example of other countries, as one of the most effective drivers of the economy. It is in the state’s interest to support both demand and supply in the housing market. We should definitely be able to afford higher scale of budget expenditure for this purpose than before. It just benefits all of us.
Jacek Furga,Ph.D.
Head of AMRON Centre
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