Karolina Wysota, money.pl: Is the Polish housing market facing disaster?
Dr. Adam Cherniak, SGH: And where does the belief that it does not exist come from?
The situation in the market is very difficult, because the recent increase in prices has made it possible for a large group of people to buy their own apartment. Those who catch this train are in a pretty good position, because their wealth is systematically increasing, and if necessary, they can change the apartment to a larger one at a low price. However, those who don't have it find it increasingly difficult to catch this train. This leads to frustration and increases wealth inequality.
The rest of the article is below the video
See also: Psychologists helped us design furniture – Piotr Voelkel – Business class #11
These are examples of Spain and Ireland. We are following the same path: we are “funding” the market, increasing mortgage-laden apartments and paying extra for those with creditworthiness. Therefore, we will have a growing group of outcasts forced to use the rental market, council or social housing – at least until the number of households decreases due to an aging population.
More and more people are involved in real estate development. This is also a warning sign?
This is one of the symptoms of an overheated market. Because a bubble in the classic sense (a large increase in prices and a sudden market crash) didn't burst and people who bought apartments as an investment didn't get their money's worth, it became a myth that you can't lose money in real estate. even more widespread. Those who entered the market in 2018 and 2019 and made money building and flipping houses, apartments, are encouraging other people who do not know what this business is. As long as we continue to market drugs with limited supply in the form of loan subsidies, the problem will grow.
Do you see the risk of a meltdown on the horizon?
I was one of the first people to signal the growing risk of a price bubble in the Polish market. Fortunately, the bubble didn't burst. But this does not mean that the crisis scenario should be put aside. Poland's housing policy is somewhat similar to the actions taken in the United States. When the American market was experiencing price increases and imbalances before 2000, the administration of President George W. Bush stepped in to prevent price drops and slowdowns in the market after the bursting of the Internet bubble. With the “big” program: the American Dream Down Payment Act, which includes subsidies for down payments on loans, especially for ethnic minorities. As a result, a huge amount of money came into the market, which led to a housing boom. This did not solve the problem, but delayed it. In 2005, prices reached unsustainable levels and the Fed raised interest rates further, restricting the availability of credit. The market then crashed, leading to the 2008 global financial crisis.
First there was the housing market collapse due to rising interest rates, and then there was the “2% safe loan” rush. A real attraction.
I want to emphasize that the crisis and the fall in housing prices are not something we should wait for. This is not a situation in which we will finally be able to get our dream apartment. This is not the time to sell, when developers go bankrupt and we buy apartments from them cheaply. The crisis comes when we can't get an apartment.
Trying to avoid a crisis by adding fuel to the fire is also not good.
The worst-case scenario is a roller coaster: boom, crisis, boom, crisis. This helps no one but the speculators who make money off the price changes. From a societal perspective, high-amplitude boom-bust cycles are unfavorable.
Is the ruling coalition doing voters a favor with its new housing agenda? PIS before elections Local government and European?
The introduction of the 500 Plus was a tribute. In the case of the newly announced program, we are talking about subsidizing loans for creditworthy families with many children who are interested in buying a relatively large property. Question: Will PiS electorate, families living in small towns and villages with an income of 7000-10000 PLN. Will they benefit from this program? For most, this will not be beneficial.
Will there be demand and supply?
Both. According to the presented assumptions, to get a zero-interest loan, you need to have a family of 5 people who can borrow a maximum of PLN 600,000 on preferential terms. zloty. Currently, building a house for such a family is more expensive and you have to make your own contribution. Does the village family have 150-200 thousand saved? zloty? I dont think so.
A comfortable space for a family of 5 is…
According to the Eurostat method, five-six rooms plus a kitchen and a bathroom, that is, it is difficult to go below 120 square meters. If the cost of building a house is currently 5-6 thousand. per square meter (without land acquisition cost), we need about PLN 800,000. zloty. Even with a zero-interest loan, you would have to have a pretty good income to get such financing from the bank.
So who is this program for?
In my opinion, demographic criteria should be considered at the political level, not at the economic or social level. Very little financial resources will go to small towns – the same was the case with the “safe 2% loan”. Not because there was nothing to buy, but because there weren't enough creditworthy households.
The second fig leaf of this program is the income limits, which only have an obvious effect. In practice, it does not cover a maximum of 5%. Households and 5 percent of these more than 90 percent already have at least one owned apartment, so they do not qualify for this program or the previous program.
Except for 5-member families, for which the first apartment requirement does not apply.
Yes. And what is most interesting, this is not a pro-demographic program at all, because its logic is the opposite: we need more children to have a bigger apartment. All demographers will tell you that we first need more housing to have more children. This program will be especially beneficial for wealthy families of 5 or more people from big cities who want to move to an area of 70 to 120 square meters.
This example distinguishes the “Mieszkanie na start” program from the “Safe 2% credit” program.
Yes, the beneficiaries will be large families, especially affluent families, but for singles the new program will be less accessible than the “safe 2% loan”. Ultimately, the mechanism and scope of action of both programs are practically identical: Over 10 years, we will spend PLN 12-13 billion on loan subsidies. The program of the ruling coalition effectively ensures continuity of funding and demand in the housing market, especially in the primary markets of large cities, where most of the funds from the previous government's program were spent. If the housing program did not continue now, the market would collapse. The program was supposed to be a cure for housing problems, but it became a panacea as the market became dependent on government subsidies.
Will there be a time when you can give them up?
The more we get used to this market, the more difficult it will be to get rid of it, and I'm not just talking about a psychological habit. This is also an economic attitude. The higher the housing prices, the more the financial availability of Poles will decrease after exiting such a program, and the more everyone will want to keep it. A similar mechanism occurs in the case of developers.
We have only just heard about the assumptions of the bill. Will we do everything by June?
Delivery will not be so easy. Developers say they have sold everything.
November and December data show the highest increase in the number of new homes for sale since mid-2022.
Is PLN 500 million in 2024 too much or too little?
It depends on how this money will be used. If all or most of this money goes to loan subsidies and reaches the primary markets of big cities, it will increase housing prices even more. However, if the same funds were spent only on municipal construction, we would not have built too many apartments.
Will more money from the program go to the secondary or primary market?
It will be the same as in case of “safe 2% loan”. – Primary market in big cities. In our country, second-hand apartments are considered inferior, and in my opinion, they should not be, because they are superior to those on the primary market, for example, in terms of location. Today, we hardly have new apartments in the centers of big cities, and if we do, they are luxurious.
And if the state starts selling plots of land in cities to developers, as they demand, will Kowalski start building affordable housing?
In our country, the developer comes to the office with a ready-made idea, and the local authorities usually agree, because there is a shortage of residential space. We lack a housing policy.
Did it end with you?
I think not. The 1990s, immediately after mass privatization, was a period in which a fairly good beginning of housing policy was established. However, all ideas were drowned in the Bauk hole (Determining the deficit of the Polish public finance sector, forecast in the 2001 state budget by Jarosław Bauk). In the years that followed, housing spending gradually declined and the state's active housing policy was abandoned, symbolized by the elimination of the Housing Office in the middle of the decade. These actions were motivated by the belief that the market would meet the housing needs of citizens and that the government had more important and urgent tasks on its agenda.
Interview by Karolina Wysota, money.pl journalist
Rate our article quality:
Your feedback helps us create better content.