4.5. Housing market

The situation on the property market in Poland in 2014 was driven, similar to 2013, by the slow but steady economic growth as well as the relatively low interest rates maintained by the Monetary Policy Council. Consequently, banks relaxed their credit policies, as mirrored by the mortgage loan offer becoming more attractive.

The Polish mortgage lending market saw no revolution in 2014 despite major regulatory changes. Although Recommendation S of the Polish Financial Supervision Authority changed the rules applicable to lending in Poland, no major change on the property market or, consequently, the mortgage lending market has been observed since the Recommendation was issued. While the minimum mandatory downpayment level was set at 5% for any mortgage loan, the number of creditworthy applicants has increased (largely due to the extension of the maximum tenor of loans for the calculation of creditworthiness from 25 to 30 years).

In addition, restrictions have been imposed on fx lending. As of July 1, 2014, only those individuals who earn an income in a given currency may apply for fx loans.

The government programme Mieszkanie dla Młodych (Apartments for the Young) was expected to bring major changes to the housing market. Unfortunately, it did not revolutionise the mortgage lending market as planned because it only covered properties on the primary market which were not always attractive to people under 35 years of age among others due to the fact that such properties were not available in smaller towns.

In 2014, the Monetary Policy Council stabilised the interest rates at low levels. The reference rate was 2% while WIBOR 3M was less than 2% in November 2014 and reached 2.1% in December. As a result, new loans (including mortgage loans) offered very low costs to borrowers; due to low interest rates and a more attractive credit offer, their creditworthiness was stronger.

A final change came in December 2014 with the introduction of reverse mortgage. It is a loan for persons who have a legal title to property; the loan is secured with a mortgage on the property. However, no bank in Poland has launched reverse mortgage products to date.

Situation on the private property market

On the private property market in 2014, demand for apartments grew while the price per square meter first increased moderately and later stabilised, both on the primary and the secondary market. The government programme Mieszkanie dla Młodych (Apartments for the Young) made it easier to meet demand for apartments despite the introduction of Recommendation S, which could pose potential barriers to mortgage lending. Demand for apartments of higher standard at prime locations clearly grew. The average size of the most popular apartments ranged from 40m² to 50m².

In 2015, the provisions of Recommendation S will continue to be implemented, including among others an increase of the required downpayment by another 5% (to 10% of property value). The Recommendation is designed to unbundle the business of banks and insurers. The government programme Mieszkanie dla Młodych (Apartments for the Young) is expected to become more attractive as subsidies to the downpayment grow to 20% of the apartment value for families with two children and to 25% for bigger families while the size of properties eligible for the programme grows from 50m² to 65m². The Monetary Policy Council is also planning further interest rate cuts in order to boost consumption and investments.

The figures below present the expected growth rate of mortgage loans in Poland as well as in the Czech and Slovak markets where mBank is present.


Source: mBank’s own study based on PSFA figures and the Deloitte report CE Banking Outlook. North-South Divide on the Road to Recovery (September 2014)

Situation on the commercial property market

In 2014, Polish demand for retail and office properties grew as local consumption was on an increase and Polish companies expanded. Demand for new commercial space, especially retail space, was very strong. Investors were mainly interested in prime properties. The biggest share in the commercial property market was that of office properties followed by retail space and industrial properties. The number of transactions in these segments increased by ca. 10% year on year in 2014. Supply of office space was bigger than demand in 2014 for the first time since 2000. In particular, the number of new investment projects in the segment was high. This augmented the already harsh competition, also price-wise, and encouraged capital investments in such properties but proved insufficient for demand to match supply. At the end of 2014, the total stock of office space in Poland was 7,5 million m², while vacant space in Warsaw and in the regional markets (Kraków, Wrocław, Tricity, Łódź, Poznań, Katowice) was 776,800 m², at 15.5% of the total stock in Warsaw. The vacancy rate in Warsaw is expected to reach 20% in 2015, suggesting a negative trend in the office property segment. In the retail property segment, demand for space in shopping malls continues to grow. Many retail trade formats, previously located outside shopping malls, are moving to the malls which offer easy and prompt access to customers. New investments are still planned in large commercial properties which attract both potential tenants and their clients, even if the total stock in the segment is no less than 11,5 million m². New supply in 2014 was 460 thou. m², another 850 thou. m² is currently under construction. Industrial properties in 2014 enjoyed a boom akin to that witnessed six years ago. Demand for industrial properties was some 50% bigger than a year earlier while supply increased by ca. 30% year on year, suggesting record-high performance of this market segment. Importantly, while the biggest volume of transactions in commercial properties was still reported in the biggest Polish cities (Warsaw, Kraków, Wrocław, Poznań and Gdańsk), smaller cities (population of 100-400 thousand) were increasingly attractive thanks to lower costs of land and construction. This is good news from the perspective of demographics as it could revert the current trend of migration from rural areas and small towns to the biggest cities. In 2015 and beyond, the trends on the commercial properties market are likely to continue. With expected further interest rate cuts, investors will pay relatively little to buy retail, office and industrial properties. Commercial property market data are sourced from the Knight Frank report Commercial Property Market in Poland, January 2015.