Safe loan 2 percent this is a lesson for the new government. Is it possible to undo the price increase?

It cannot be said that the United Right did not try to improve housing availability. It tried from different angles: there was Mieszkanie Plus, SIMs and SANs, which, however, did not reach the full implementation stage, Safe Credit 2%. However, the life of the programs was short, and Mieszkanie Plus turned out to be a particular disaster, under which just over 7,000 apartments were built. premises, although PFR Nieruchomości, which coordinated the work, assured that it had secured financing for the construction of up to 50,000. apartments. Much media attention was devoted to residents’ allegations that the apartments provided under the program were made of cheap materials, defective, and that access to ownership, which was supposed to be a minor formality, was changed after the conclusion of the contracts to the detriment of the residents.

Banks do not accept applications for loan subsidies

Hardly anyone remembers Mieszkanie Plus today, but BK2 will appear in all conversations about the real estate market in Poland and whether the state should interfere in this market at all for a long time. Although the intentions were laudable, the result of the six-month operation of the loan subsidy program is an increase in real estate prices by several percent.

Let’s start with the caveat that it is not yet known whether this is the end of the program or just a suspension. From January 2, banks are not accepting applications because the subsidy limit thresholds have been reached. At the same time, the new government is sending signals that it has no intention of completely canceling BK2, but wants to improve it. If you believe the Ministry of Development and Technology, intensive work is underway to amend the regulations.

“Our goal is to make the new instrument, on the one hand, more attractive for people with lower incomes and larger families, and, on the other hand, to limit its abuse by people whose high earnings allow them to obtain a loan in a regular market offer,” we read in the release. Ministry of Development. It assured that money for subsidies for loans was provided in this year’s budget, but no amounts were indicated. According to money.pl sources, the government plans to allocate at least PLN 400 million for subsidies for preferential loans this year.

The new version of the program is to be a compilation of the election promises of the political groups forming the ruling coalition. The Civic Platform went the furthest in its promises, accepting a loan with a 2% commission. (actually larger) was considered insufficient and put a 0% loan proposal on the table. This is not the end: PO announced that the state would cover the bank’s interest and margin for a specified period of time, and the borrower would only repay the capital. Two people earning the lowest national salary would have creditworthiness. The latter is a strong entry into the competences of banks, which, based on their analytical tools, determine what level of earnings and at the same time liabilities of potential borrowers gives great hope that the loan will be repaid.

Creditworthiness is not a whim

Creditworthiness is not a whim of banks that have conspired to prevent Poles from buying their own apartment. As bad as it sounds, it protects customers from themselves, or rather from bad financial decisions. Interest rate increases from October 2021 to September 2022 clearly showed that loan installments can increase quite suddenly and persist for several quarters. Anyone who does not have a financial cushion and a salary high enough to pay higher installments at the expense of other expenses will find themselves in a dramatic situation, the final result of which may be the termination of the loan by the bank, resulting in the need for immediate repayment. Failing this, the bank may proceed with foreclosure on the property and evict existing borrowers.

To provide relief to borrowers, the previous government introduced loan holidays. They were criticized by the banks that de facto financed them. Spokesmen outlined scenarios in which banks’ finances would be at risk due to holidays, i.e. a short break in repayment, but nothing like that happened. Nevertheless, borrower rescue programs should not be something naturally expected, but a tool used as a last resort when lack of action by the state may lead to serious problems with the solvency of a large group of customers.

The proposal of zero credit and lowering the requirements for calculating creditworthiness were immediately assessed as populist and resulting only from the desire to outbid the promises of Law and Justice. Perhaps on Thursday we will find out whether Tusk has buried these proposals somewhere deep: a conference of the Minister of Development is scheduled for that day, during which he will present the assumptions of the housing program or modifications to BK2.

High demand, low supply – this had to end with price increases

We should hope that since the election campaign is over, ideas aimed at encouraging voters who are less knowledgeable about the economy will remain in a drawer somewhere. All the more so because the Minister of Development, Krzysztof Hetman, no longer has to keep the door open: if anyone assumed that a good housing program could be based solely on loan subsidies – without increasing the supply of apartments – then BK2 confirms that this is a huge mistake.

The increase in real estate prices in the last two quarters is related to subsidies. This is because in a market that had been stagnant for almost 2 years – developers limited investments because, due to high rates, few people applied for a loan, cash transactions for apartments intended for investment dominated – subsidies for loans were “abolished”. Only customers who met quite stringent age requirements and, above all, did not own any other property could take advantage of them. Marriages in which one of the partners had a flat, even if it was purchased before the wedding and was his sole property, were excluded from the subsidies. However, there were no maximum income thresholds: anyone who had creditworthiness, including wealthy people, could apply for a loan with a government subsidy for 10 years. However, those who earn really well did not apply for the subsidy, because on preferential terms they can buy an apartment for an amount not exceeding PLN 700,000 or PLN 800,000. PLN, and with the current amounts these are not apartments. We write here who turned out to be the typical beneficiary of the program.

Let’s summarize the 6 months of the program’s operation: by December 21, nearly 58,000 contracts were concluded. credit agreements. Everyone who submitted an application by the end of the year and meets the conditions will be eligible, and the banks are still analyzing the applications, so the final data on the number of beneficiaries will be known in about 3-4 weeks. Therefore, it can be estimated that sixty-several thousand people bought apartments on preferential terms, but the price per square meter was several, a dozen or even more than 20 percent higher. more than it was in May 2023.

Millionaires from studio apartments

Seeing the market recovery, sellers raised prices because they could afford it in the conditions of limited demand. To put it more humanly: when a product becomes desirable but is in short supply, sellers may raise prices because they know that sooner or later they will find a buyer. The lecture on online sales websites led to the belief that everyone who could, tried to become a millionaire easily.

Prices skyrocketed and sellers wanted PLN 14,000 for a medium-standard studio apartment on the outskirts of Warsaw or Krakow. zloty. It is necessary to take into account the fact that the offer prices differ from the final ones, i.e. those in notarial deeds, by 8-11 percent, so the mythical invisible hand of the market worked to some extent, but the prices still grew at an alarming rate. This applies to developer apartments and the secondary market. In Tricity, prices increased by 27% throughout 2023. it increased in 2023, in Krakow by 24%, and in Warsaw the average price per square meter of apartments offered by developers increased by 23%. (data: RynekPiertotny.pl).

At the same time, wages increased by 12.3%. (Polish Economic Institute), and these are average increases achieved by large companies, including state giants. While wage increases affected only some employees, all buyers had to cope with high increases in real estate prices. The average monthly salary in the enterprise sector in November 2023 compared to November 2022 increased nominally by 11.8%. and amounted to PLN 7,670.19 gross, i.e. a little over PLN 5 per month. Therefore, in the capital or Krakow, spouses earning above the average are not able to buy a square meter with their combined salaries – even with the hypothetical and unrealistic assumption that they will spend all their earnings on the purchase.

BK2 has therefore made the purchase of an apartment more possible for sixty-odd thousand customers, and at the same time it has distanced the purchase of an apartment from thousands of customers, whose number is not yet estimated. And if he didn’t dismiss it, he forced you to revise your plans and buy a smaller place or for a higher amount.

What instead of Safe Loan 2%?

What can the government offer in return? Informants report that the new project is intended to support primarily people with lower incomes and larger families, and to exclude the best-off customers who can afford a fully commercial purchase. So, let’s remember, on average over 15,000. per meter in the largest cities. Reducing the number of beneficiaries may have the positive effect that sellers will have to lower their amounts to attract customers. It would be good if the government took advantage of the Poland 2050 proposal, which referred to the need to free urban land for development investments. The lack of available land results in urban sprawl, while the appearance of 100 or 200 new apartments at affordable prices in the district increases the negotiating possibilities of customers.

Rising prices of construction materials and energy prevent a spectacular drop in prices, but a return to the level before the BK2 program came into force would be a great relief. Developers hope that the government will simplify the construction process, thanks to which they will be able to build faster and at least a little cheaper.

Waldemar Buda assured until the end that prices would not increase

The new government should learn one more lesson from BK2: the need to reliably predict the impact of the program on real estate prices. Before its introduction, Minister Waldemar Buda did not see any threat and believed that the concerns presented by journalists were exaggerated.

– Approximately 230,000 are built annually in Poland. apartments. Approximately 30,000 will be allocated to the program, so it will not increase prices. Today there are no buyers for apartments, developers are closing construction projects. If someone says that prices will increase, they do not understand this roar and should update their knowledge – said the minister in March in “Sygnały Dnia”. – We are concerned that developers will not limit construction projects due to the demand problem.

Let us hope that the current minister has “updated his knowledge” to an appropriate extent.