Archives: Raport Amron-SARFiN

Very good results in mortgage lending recoded in Q4 2015 translated to the results of the whole year, which turned out to be the best since 2012. Both the number (181 thousand) and the value (PLN 39.3 billion) of newly granted loans in 2015 were similar to results noted in the crisis year 2009 (respectively 189 thousand of loans for a total amount of PLN 38.7 billion). This represents an increase in value (by 6.78%) and in number (by 4.16%) of newly granted housing loans in comparison to number and value of loans granted in 2014. Polish market managed to return to so-called ‘organic’ ability to generate an annual volume of housing loans at the level of PLN 38-40 billion, with the number of 180-190 thousand, defined several years ago by Polish Banks Association.

Banks’ lending activity improvement was affected mostly by the clients’ concerns about the consequences of imposing additional financial burdens on the banking sector (as a result of increased contributions to Bank Guarantee Fund and the new Credit Support Fund, applying new rules favourable for foreign currency borrowers and covering losses related to bankruptcy of several credit unions and cooperative SK Bank) and the announced ‘bank tax’ implementation. All those actions influencing banking sector caused a significant increase in loan margins even before the year 2016 – an actual year of implementing the ‘bank tax’ and the additional financial burdens. In 2016, further increases in loan margins and reductions in the availability of housing loans are expected. The perspective of increase in the level of minimal downpayment from January 1, 2016 up to 15%, as well as changes in ‘Flat for Youth’ Programme were factors that additionally stimulated lending activity.

In 2015 those purchasers, who were able to pay by cash or had savings on term deposits or other financial instruments, took the opportunity to choose a relatively low-priced flat among increasing offer of dwellings on primary market . Those investments, aimed mostly for rent, were often supplemented by housing loans, which explains the fact that the number of loans with LtV ratio up to 30% has doubled in 2015. Profitability of lease – especially in Warsaw, reaching even 6% before taxation – is far higher than the usual returns offered by financial institutions. The geographical structure of lending confirms high share of Warsaw in total structure of loans granted in 2015, which increased by 10 p.p. and amounted to 36.33%. This means that more than every third housing loan was granted for housing purchase in the capital city.

Such a high demand on housing market in 2015 was reflected in the developers’ sales results  on the level comparable to the results of the years before the crisis. This optimism translated into further increase in number of construction permits (by 20%) and constructions started in 2015 (by 14%), which turned out to be record-braking results, the best since 2008.

Wide offer on primary market resulted in stabilization of transaction prices in most locations in our country. Only on three major markets, where the interest in housing purchases for investment reasons was the higher, the average transaction prices increased, In relation to Q4 2014, increases were noted in Wroclaw (by PLN 157/sq.m.), Warsaw (by PLN 147/sq.m.) and Krakow (by PLN 133/sq.m.).

Lending activity of Polish banks in 2016, including the availability of mortgage loans and the scale of housing finance, will be highly affected by the laws issued by newly elected Parliament and decisions taken by the new government. During a press conference on January 13, 2016, the Minister of Infrastructure and Construction Andrzej Adamczyk and the Deputy Minister Kazimierz Smoliński announced the implementation of the National Housing Construction Programme that will include, among others, building societies and renovation tax reliefs. A great emphasis will be placed on constructing the affordable dwellings for rent. Such formulated programme is consistent with the Housing Recommendations formulated several years ago by Polish Banks Association, which declared its readiness to support those actions by own expertise. Implementation of that Programme  would finally constitute the system-based solution, the effects of which will however lead to better results on housing market and increases in lending activity in long-time perspective.

In 2016, the banks’ lending activity will be affected most of all by less available and more expensive housing loans, exhausting funds in the ‘Flat for Youth’ Programme budgeted for this year and a lower maximum LtV ratio at the level of 85%. Will the prospect of another increase in the obligatory borrower’ downpayment to the level of 20% from January 1, 2017, mobilize potential borrowers to take a purchase decision before the end of this year? Even if so, it may not be enough to achieve  better results than the results recorded in 2015. In fact, the amendment to the act on tenants’ rights protection would be enough to ensure further growth of investments in dwellings for rent, made not only by individual investors, but also by institutional entities.

Jacek Furga
Head of AMRON Centre

On the occasion of the Jubilee – as you read the 25th issue of the AMRON-SARFiN Report – I would like to thank all Readers and Recipients of our Report. Both those, who accompanied us from the very beginning and those, who joined us later. It is thanks to all of you, thanks to your opinions and suggestions, the quarterly publication of the Report became the permanent feature in the calendar of all active participants, observers and analysts of Polish housing market. What makes the Report reliable and attractive, is the quality and consistent growth of both databases – AMRON database increased from 740 thousand information at the end of 2009 up to 2.35 million records as for the end of October 2015.

For six years we have been quarterly providing you with update information on mortgage loans and housing transaction prices. In the period analysed in the following issues of the Report, i.e. since Q3 2009, banks in Poland granted 1 247 322 mortgage loans for the total value of PLN 261 billion. However, the number of active loans increased only by 600 thousand of loans and value of the total mortgage loans portfolio grew by PLN 166 billon. In the same time, 1 046 285 permits for housing construction were issued and 893 358 housing units were completed. Interest rate of a mortgage loan diminished from 7% to 3.5% and the decrease of the nominal housing transaction prices ranged from 2.48% (i.e. PLN 190 per square meter) in Warsaw to 8.83% (i.e. PLN 512 per square meter ) in Gdansk.

It would seem that such favourable conditions were conductive to increase in mortgage lending. Such was the impression after analysis of Q2 2015 results, in particular in scope of the unexpected, unprecedented since last few quarters increase in mortgage loans sale. Last quarter I advised not to celebrate the reversal of the downward trend. Results of mortgage lending in Q3 2015 turned out to be lower than those recorded in Q2, both in terms of value of new loans (by 3.52%) and volume of those loans (by 5.50%). Banks granted 43 945 new housing loans of the total value of PLN 9.704 billion. It is however possible that the final result of the year 2015 may be slightly better than the result of the year 2014, at least from the new loans value perspective – value of new loans portfolio is likely to reach the level of PLN 38 billion. Unfortunately, it seems that the volume barrier of 180 thousand of new loans will be difficult to overcome.

It is hard to expect mortgage lending to dynamically increase in 2016. Lack of saving instruments for systematic downpayment collecting – in 2016 on the obligatory level of 15% – results in more favourable banks’ offers for affluent families, which have actually fulfilled their housing needs in previous years. At present, those most wealthy purchasers buy another housing for rent. Within those 6 analysed years, share of Warsaw citizens in total number of mortgage borrowers increased from 28.9% in Q3 2009 up to nearly 37.% in Q2 2015, when it reached its maximum (in our researches’ history) level. Analysis of the new loans portfolio in terms of LtV ratio and loan period confirms banks’ adaptation to requirements defined in Recommendation S.

Developers still have reasons to be optimistic. Q3 this year was the following period of increases on housing market, in both developers and private sectors. Comparing to the previous quarter, the greatest increase (by 16%) was recorded in number of completed housing units, which amounted to 37 529. From July to September of 2015, there were issued 51 673 construction permits, which is 3% more than in Q2 2015. The only decrease (but insignificant – only by 2%) was recorded in number of constructions started, which in Q3 2015 amounted to 47 749.

Such developers’ activity results in stabilisation of the transaction prices in all surveyed cities. Only on two out of eight monitored markets the prices slightly diminished comparing to previous quarter – in Katowice agglomeration by PLN 24 per square meter and in Lodz by PLN 12 per square meter. The other markets recorded small increases – the biggest in Warsaw, where the average price of a square meter of a dwelling amounted to PLN 7 463, i.e. PLN 109 more than in Q2 2015. Relating to Q3 of the previous year, the average price of a square meter decreased only in Gdansk (by PLN 154 per square meter). In Katowice agglomeration the average transaction price remained unchanged, while in other seven locations it increased – the most significant increase was recorded in Warsaw and Wroclaw, respectively by PLN 201 per square meter and PLN 185 per square meter.

Availability of loans, including mortgage loans, as well as scale of housing market finance, will be determined most of all by laws passed by newly elected Parliament and decisions of the new government. First assembly of the Parliament of its new term proved that it is possible to pass all three parliamentary readings of the draft law in one working day. If only the act on saving-building banks was passed in this rate, first savers would appear already in 2016. Comparative analysis of the saving-building banks development in Czech Republic, Slovakia and Hungary justifies the estimation of at least 500 thousand of new saving contacts in Poland. It means that after 3 years form launching this system in Poland, volume of savers could exceed the current volume of mortgage borrowers amounting to 1 965 thousand.

Jacek Furga
Head of AMRON Centre

The results of Q2 2015 is a perfect example confirming the seasonality of banks’ lending activity, resulting from the seasonality of their customers’ activity in the residential investment market. After a very poor results of the first quarter, situation on housing loans market in the second quarter was characterized by growth unprecedented for several quarters. Banks granted 46 504 new housing loans for a total amount of PLN 10.058 billion. Comparing to Q1 2015 this means an increase of value of newly granted housing loans by 12.03%, and the number – by 10.28%.

Partly this was an effect of continued very low PLN interest rates and attractively low transaction prices. There is also a new factor – the take-strength political campaign launched against banks and announcements imposing on banks new financial burden are seen as a threat to savings deposited in banks. According to information published by the National Bank of Poland, the accumulated amount of deposits in Polish banks decreased by more than PLN 5 billion in period from February to June 2015. These money supplemented by mortgage loans appeared on the real estate market. Investment on real estate market is not only more profitable than bank deposit, but also appears as more secure in the current situation.

When will better times for savers come? Lack of government savings programs, which offer opportunities of systematic collection of own contribution, results in more favourable banks’ offers for affluent families. Only during last two years, the share of Warsaw in the location structure of new loans increased from 26.4% to 37.1% and reached a maximum level in the history of our studies. In Q4 2008 this level equaled to 35%.

Analysis of the structure of new loans in terms of the LtV ratio and repayment period confirms that banks have adapted to the requirements of the Recommendation S. At the same time it doesn’t confirm the concerns on restricted access to mortgage loans by own contribution requirements. More than 52% of new loans did not exceed 50% of the real estate value. The average value of housing loan has stabilized at the level of PLN 210 000.

Spring revival was also noted on the housing market. In Q2 2015, permits were issued for the construction of 47 977 dwellings, which means an increase of 25% comparing to the previous quarter. In the period from April to June, the number of started constructions of new housing units was doubled and amounted to 48 501, while the number of completed constructions increased by only 1% on quarterly basis and amounted to 32 031 units.

In Q2 2015 only slight changes of the residential units’ average transaction prices were observed in the eight largest Polish cities. A slight decrease (by about 50 PLN/sq.m.) of the average transaction prices per 1 square meter was noted in Poznan, Lodz and Gdansk. In two urban centers, i.e. Bialystok and Katowice agglomeration, the average prices remained at the same level as previous quarter. An increase was recorded in Wroclaw (by 58 PLN/sq.m.) and in Warsaw (by 86 PLN/sq.m.) – the average transaction prices per 1 square meter in these cities amounted to 5 534 PLN/sq.m. and 7 354 PLN/sq.m. respectively.

The final form of the act on special rules for restructuring mortgage loans denominated in foreign currency due to changes in foreign currency exchange rates and the amendment of other laws, currently being discussed in Parliament, will effect on the availability of bank loans, including mortgage loans. The politicians’ desire to please a group of over 600 thousand CHF borrowers – potential voters – will  lead not only to higher costs of PLN loans, but also may result in limited access to mortgage loans for those, who would like to improve their housing situation in the future. Answer to the question on constitutionality of that law I leave for specialists. However, I can comment with full responsibility the impact of this act on the condition of Polish loan market (not only housing loans). I believe this is a very bad solution – unsatisfactory for most of CHF borrowers and unfair for those, who – aware of the risks – acted responsibly and decided to take loans of lower amount or take a loan in domestic currency. This act is also discriminatory for those, who did not take a risk and still did not improve their housing situation. In such circumstances, it is extremely difficult to predict the results of the housing loan market at the end of the election year 2015.

Jacek Furga
Head of AMRON Centre

Unfortunately, the latest results do not breach the downward trend in the scale of lending in the banking sector, which has lasted for over more than eight years now. In this case seasonality effect, occurring also in the previous years is significant. According to this effect, in each case the results of first quarter are lower  than the results of the last quarter of the previous year. Fortunately, this year’s decrease was negligible, less than 2%. Both, the number (42.2 thousand), and the value (PLN 8.9 billion) of newly granted loans in Q1 2015 can constitute good foundation for improvement in the future quarters. But can we count on this improvement?

Neither exceptionally low  PLN loan interest rates, nor attractive prices convinced buyers to take out long-term mortgage loans. Opportunity to purchase on the housing market – with low prices and the increasing range of dwellings – was used by those, who had cash or who withdrew their savings from bank deposits or other financial instruments and invested in dwellings earmarked for lease as  lease profitability definitely exceeded  payoffs offered by financial institutions. Buyers however were not able to take out all newly introduced dwellings from the market. A consequence the supply on the primary market increased again. Despite concern about this fact, developers introduce new investments on the market, trying to head off potential negative effects of the developer’s act  toughening.

In accordance with the principle of seasonality, the number of constructions completed in Q1 2015 decreased by 26% in relation to 2014 and amounted to 31 817 dwellings. In the case of the number of started constructions (31 809 constructions),and the number of building permits issued (38 447 constructions), there were noted slight changes, respectively a decrease and increase by 5%.

Since 2011, transaction prices in the biggest Polish cities have slightly fluctuated. On an annual basis (Q1 2015/Q1 2014) there was noted a decrease of average transaction price in two of all analyzed cities: in Cracow (by 82 PLN/sq.m.) and in Gdansk (by 58 PLN/sq.m.), while in Warsaw and Bialystok prices remained at the same level as in 2014.  In remaining cities, the average transaction prices per 1 sq.m. increased in relation to Q1 2014. The largest increase was noted in Katowice, while in Poznan, Lodz and Wroclaw average transaction prices increased respectively by 166, 161 and 39 PLN/sq.m.

This confirms our thesis from the previous Report  on a kind of ‘testing’ of the local markets’ readiness to accept prices increases. However, in AMRON Centre’s opinion there is no justification for such a scenario in the near future. There is no argument allowing to predict an increase in housing lending. It is hard to expect an increase of funds from the capital market on housing investment. Decrease in funding of housing investments in Poland by our economic emigration is also worth mentioning. According to the most recent surveys of National Bank of Poland, there are more and more emigrants, who abandon plans of a rapid return and begin to organize their lives in exile. This attitude will not be changed also by what was said during the presidential campaign – the housing policy was practically omitted. Learning lessons from the results of the presidential election, Polish Banks Association may no longer witness the omission policy of Polish government and parliament in the sphere of housing finance. For several years we unsuccessfully promote system solutions proven in many countries.

Another election campaign is getting close – parliamentary elections. As a banking sector’s chamber of commerce we have already started a discussion on the future system solutions in the area of housing finance, which should be based on two pillars of finance – mortgage banks and building societies. The agenda of the Housing Finance Congress organized by Polish Banks Association and AMRON Centre on November 26-27, 2015, includes the debate on housing policy that should be completed with the adoption of Housing Programme for 2016-2030. We look forward to your suggestions, which should be the subject of this debate, as well as declarations of participation in the Congress and the debate. We hope that the winners of October’s elections will participate in the Congress and will be ready to create a new order of housing.

Jacek Furga
Head of AMRON Centre

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

The analysis of banks’ lending activity in Q3 2014 shows that the summer months have brought a decline in both number and value of new granted loans. In comparison to Q2 2014, the value of new loans was lower by 3.61% and amounted to PLN 9.232 billion. Polish banks granted 43 653 new mortgage loans, which was 4.06% less than in the previous quarter. Lending activity was also lower comparing to the same period last year. From January to September 2014, banks have signed 131 thousand new agreements for a total value of PLN 27.6 billion. Comparing these results with the same period of 2013, the forecast result for 2014 can be estimated in a slightly higher level than in 2013, but lower than in 2012 – in terms of both number of mortgage loans (we forecast that the total volume of new loans will amount about 180 thousand) and the total portfolio’s value (i.e. about PLN 38 billion).

The share of non-performing mortgage loans in total housing loans portfolio amounted to 3.19% and it remained practically at the same level in comparison to the previous quarter. The quality of loans denominated in foreign currencies was slightly worse (i.e. by 0.75 p.p.) – share of non-performing mortgages in the portfolio of foreign currency loans amounted to 4.21%.

Quite different situation was observed in the area of housing investment. Q3 2014 was another quarter of growth. Comparing to the previous quarter, both the number of completed housing units (by 10%) and the number of started constructions (by 6%) increased. Slightly lower growth – at the level of 3% – was noted in number of construction permits issued.

In Q3 2014, the average transaction prices per square meter of housing unit changed slightly. In Cracow and Bialystok a slight decrease of average transaction prices was noted, respectively by PLN 44 and PLN 11 per square meter. In two cities, i.e. Wroclaw and Lodz, average transaction prices increased by over PLN 100 per square meter. It can be stated that in Warsaw, Wroclaw and Lodz prices remained at the level of the previous year (Q3 2014 / Q3 2013). Generally, we can confirm the stabilization of the average prices on practically all of the analyzed markets.

Results of the “Flat for Youth” government Programme noted in Q3 2014, which were worse than in Q1 and Q2 2014, confirmed my earlier skepticism. It will be difficult to acquire more than 15 thousand Programme participants by the end of the year. The share of loans with subsidies in total number of newly granted loans has systematically decreased from over 10% in Q1 2014 to 8.4% and  7.5% respectively in next quarters.

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. Starting a system supporting long-term saving on housing purposes is a chance for stimulate the housing finance market and improvement of the housing situation. Unfortunately, recommended by the Polish Banks Association a long-term saving system is still waiting for a reliable assessment of the government.

Jacek Furga
Head of AMRON Centre

Unlike results of Q1 and Q2 2013, which were not congruent with the model of seasonal cyclicity, the numbers noted in Q2 2014 related to the results carried out by banking sector in the previous three quarters confirmed seasonal cyclicity of the phenomena occurring both on housing loans and – what is more obvious – also housing market. The results achieved in Q2 2014 are similar to the level of numbers noted in Q3 and Q4 2013. Although it is unclear whether significant increase both in number (about 8.48%) and value of mortgage loans (8.17%) granted in Q2 2014 comparing to Q1 2014 is a sign of a trend change or just a seasonal correction. A summary of the first half of this year shows that the year 2014 may bring slightly higher result of lending than 2013, but is still too early to speculate about any signal of recovery in this area.

To sum up the first half of 2014, a significant increase in construction permits issued and construction started on the primary market (respectively by 38% and 51% compared to 2013) and sustained at a similar level number of completed housing units can be seen in the housing market. However, analyzing these two periods we must pay attention to the fact that development sector reduced the supply in 2013 and it was a result of a very high number of dwellings put on sale in 2012 (which was caused by entering into force of the so-called “Development Act” – as it was repeatedly pointed out in the previous issues of the Report). Therefore, the results of 2014 should not be considered as an exceptional recovery, but rather a natural reaction to the sector at a satisfactory level of sales.

In Q2 2014 the average transaction price decreased in three cities. In Warsaw the average price was lower by PLN 40 per square meter comparing to the previous quarter. Most serious depreciation of prices was noted in Lodz and Wroclaw, where the average price decreased by PLN 81 and 118 respectively. In other cities slight increases in average price of 1 square meter of a flat (between PLN 20 and 100) were noted. Generally, we can confirm stabilization of the average prices of practically all of the analyzed markets.

Despite of the relatively high interest in the “Flat for Youth” government Programme called noted in Q1 2014, the results of Q2 2014 confirmed my earlier skepticism. In Q2 2014 interest in ‘Flat for Youth’ Programme was relatively lower comparing to Q1 2014. The share of loans with subsidies in total number of newly granted loans decreased from over 10% to 8,4%. The government little changes, which increasing the amount of state aid for the participants of this Programme, will not help. It is the time for implementing system solutions. Polish Bank Association, in cooperation with senators of Budget and Public Finance Commission, defined recommendations for a system supporting long-term saving on housing purposes, adapted to Polish macroeconomic determinants and eliminating risk for national budget.

Starting a system supporting long-term saving on housing purposes will be an issue of key importance for further development of the housing market in Poland.

Jacek Furga
Head of AMRON Centre

In the last issue of the Report, we summarised the previous year and estimated its results on mortgage market as the weakest since 2005. At the same time, sales results in developers’ sector were impressive. Analysis of the results for the first quarter of this year bring similar observations. Explanation of such divergence seems to be quite simple. Significant part of transactions on housing market are concluded with no mortgage loan.  Polish purchasers – but not only them, as the increasing share of transactions concluded by Ukrainian purchasers is noticeable – came to conclusion that investment on housing market is not only safer, but also more profitable way to locate savings, deposited until now in banks or investments funds. Especially when further prices decrease seem to be highly unlikely. Purchase of a flat may also be considered as a guarantee of financial stability on retirement as a potential source of additional incomes.

Due to already confirmed seasonal cyclicity of both mortgage and – which is more obvious – housing market, analyses presented in the Report refer to numbers noted in Q1 2014 in relation to numbers noted in previous quarter (Q4 2013), as well as to those of respective period of previous year, i.e. Q1 2013. Unfortunately, even such an operation does not bring the positive conclusions in scope of mortgage lending. The only consolation is the fact, that the results recorded in Q1 2014 were better than the results of first quarter of… 2009! However, from the other hand, no one did actually expect the reverse of the downward trend that lasts continuously since half-year of 2011. Results noted in the analysed period, both in terms of volume (41.9 thousand) and value (PLN 8.8 billion), may be considered as a good basis for improvement in further quarters, all the more that on housing market there was observed the promising revival.

Significant changes may be observed in particular in relations to the results of Q1 2013 – number of new constructions started increased by 49% and number of issued construction permits grew by 16%. Analysis of the transaction prices noted in Q1 2014 confirms the continuous stabilization at all observed markets. The greatest divergences were recorded in Poznan (plus PLN 95 per sq.m.) and in Katowice agglomeration (minus PLN 44 per sq.m.)

The new government Programme „Flat for Youth” started at the first quarter of this year. Loans granted during those three months, which fulfilled the Programme’s criteria, constituted 10% of the new loans portfolio. That is not a bad result, however the final opinion on its attractiveness is still a matter of future assessment. Implemented ratios for calculating the price limits definitively discriminate citizens of particular regions of our country. Let me suggest to base the first verification of the Programme’s terms of limits’ calculations on AMRON database – AMRON means NORM!

The General Assembly of Polish Banks Association took place in April 2014. During the meeting, the housing recommendations defined few years ago were once more confirmed. Adequate proposals, including complete drafts of required bills, were delivered to Parliament, Government, National Bank of Poland and Polish Financial Supervision Authority. We are not waiting for government’s initiatives – we present solutions. Issue of the key importance for further development of housing market is a system supporting long-term saving on housing purposes.

Jacek Furga
Head of AMRON Centre

I shall not escalate the tension with longish introduction and I will reveal the facts at the very beginning. It was the weakest year for mortgage business since 2005. Both volume of loans granted in 2013 (176 thousand) and its value (PLN 36.5 billion) were lower than the volume and value of loans granted in the crisis year 2009 (respectively 189 thousand of loans of the total value of PLN 39 billion). Neither unusually low interest rates, nor attractive prices, which seemed to reach its minimal levels in most of locations, were not attractive enough to encourage potential purchasers to take out a long-term mortgage loan. Even such an incentive as amended Recommendation S, which limited loans with LtV ratio at the level of 100% after January 1, 2014, did not work out. Transactions on housing markets were concluded by those purchasers, who disposed cash or who withdrew savings from banks deposits or other financial instruments and invested it in real estate. It resulted with significant developers’ sales volume, comparable with results noted in record-breaking first quarter of 2007. At the same time, however, number of construction permits issued in 2013, as well as number of constructions started in 2013 were over 10% lower than in previous year, which seems to be a not quite good prognosis for the nearest future.

In second half-year of 2013, the downward trend on housing transactions market finished. After five years of constant decrease in average housing prices in the major Polish cities, at the end of 2013 the average transaction prices in all agglomerations analysed by AMRON Centre were higher than a year ago. As far as Katowice, Bialystok or Lodz is concerned, the increase was marginal – from PLN 11 to 61 per square meter, but at the same time in Gdansk and Cracow appreciation of prices exceeded PLN 200 per square meter. Analysis of changes in housing prices within last quarters proves that on most of analysed markets prices reached their minimal levels and it seems that in next several quarters we shall witness slights fluctuations up and down until the market’s clear increase impulse. New governmental Programme “Flat for Youth” will definitively not be such an impulse. At least not in the current shape. Obligatory borrower’s down-payment in the amount of min. 5% of the housing value binding since January 1, 2014 will not support the market’s development as well.

With no satisfaction I may refer to my introduction to the AMRON-SARFiN Report 4/2012, where I predicted that there was no chance for improvement on housing market in few next years’ perspective if government did not start act efficiently and if parliament did not take wise decisions, taken above the particular interests of political parties. We wasted that year!

Polish Banks Association has consequently, since several years, submitted to government and parliament the assessment of current situation supplemented with concrete solutions, particularly in scope of programme of flats for rent and supporting the saving system for housing purposes. Propositions of the long-term housing programme for different social groups was submitted to heads of particular ministries, nominated within the recent reconstruction of Polish government.

Jacek Furga
Head of AMRON Centre

The third quarter of 2013 in terms of results of both volume (45.8 thousand of new loans) and value (PLN 9.5 billion) of newly granted loans, was already the second period recording the increase of both indicators. Unfortunately, even sustaining such speed of growth – on the level of c.a. 4% – in the following fourth quarter of 2013, does not change the fact that the most probable results of the year 2013 will turn out to be lower than those achieved in the worst as far as till now, the after-the-crisis year 2009.

Much more attractive information are given by the developers’ sector, according to whom there is a significant increase of housing units sale and significant reduction of earlier reserve of unsold housing units. There is also a growing number of housing transactions (both on the primary and secondary market) realized without banking loans – particularly in the most cheapest and most expensive housing units segments.

Those who apply for a mortgage loan, try to benefit from the last months before the entering into force the forth version of Recommendation S issued by the Financial Supervising Commission and to take a loan for the full amount of the investment. Q3 2013 brought a significant increase of the number of loans with LtV level above 80% – by 6 percentage points. Changes in the structure of LtV for new loans prove that participants of real estate market (both banks and housing units purchasers) respond the upcoming amendment to Recommendation S entering into force on January 1, 2014 and use the last possibility of financing the purchase with a loan for 100% of the property value.

The summer months were conductive to new flats constructions – third quarter 2013 brought a slight increase in the number of started constructions. The number of investments started from July to September was 38 903, which meant an increase by 4% comparing to the previous quarter. In the analyzed quarter, the number of completed housing units increased to 35 241 comparing to 30 856 completed housing units in Q2 2013. The number of issued construction permits decreased by 4% in comparison to Q2 2013 and in Q3 2013 amounted to 36 996.

Analyzing the housing construction results for the period of three ended quarters of the year, we should stress that there was a constant improvement of active indicators from the very beginning of the year up to now. On the other hand, the economic activity of investors in the domestic housing market is still at a much lower level than in previous years. In order to make own decisions on strengthening own economic activity, the developers’ sector is currently expectant for some positive signals on future access to banking finance both for developers and individual housing purchasers and – at the same time – for the news on government’s planned activities aiming to support the housing market. However, factors proving a change in investors’ (mostly developers) attitude from conservatively-expectant to pro-investment seem to be more and more distinct.

Such a market diagnosis is confirmed also by the first signs of growth in investors’ interest in housing units purchase, reflected in the observable change in transaction prices trend.  In the analysed Q3 2013, the price increase was noted in all analysed cities except in Wroclaw, where the average price for 1 sq.m. of a flat decreased slightly (by 3 6 PLN) comparing to the previous quarter. Average transaction prices in the biggest cities of Poland increased from 65 to 95 PLN for a square meter of floor area of a flat. Although the annual analysis indicated an increase in average transaction prices only in three cities: Bialystok by 101 PLN/sq.m., Poznan by 121 PLN/sq.m. and Gdansk by 66 PLN/sq.m., but the results of the forth quarter may confirm the change in the trend for the remaining locations.

At this point with great pleasure and satisfaction I would like to inform regular readers of AMRON-SARFiN Report that in response to the growing need for the most current market information, AMRON Centre decided to present the current average housing price quotations. Such values shall be taken basing on sales agreements concluded in the given period on the secondary market in weekly cycles and will be presented on our website (www.amron.pl) on interactive line charts, which will allow to collate data from different locations and on different housing categories for individual analyses of the particular housing market segments. I sincerely invite you to get acquainted with our new offer.

Another decision of the Monetary Policy Council to cut the basic interest rates by another 25 basic points and some signals of the improving economic situation should contribute to further recovery on the housing transaction market and on the mortgage loans market. In the last quarter, the government and the parliament were concentrated on ending the legislative process, enabling the initiation of ‘Flat for Youth’ Programme. An opportunity to boost housing financing market and the improvement of the residential housing situation in our country is – still waiting for a fair assessment by the government administration, meanwhile recommended by Polish Banks Association – the launch of a system of long-term savings based on the model Buasparen system of saving-building banks.

Jacek Furga
Head of AMRON Centre