Situation in the Polish housing market compared to other EU countries

Q e aim of this study is to analyse situation in the Polish housing market in 20092013 against the background of other EU countries. Q is article describes a de! cit situation in the housing market, housing resources, the number of \ ats built per year and governmental programmes to support housing. Q e study examines the problems of \ ats for rent by comparing their percentage in Poland with the percentage of \ ats in the European Union. Q e situation in the Polish housing market was analysed from the standpoint of the vision of social market economy for Europe of the 21 century.


INTRODUCTION
e role of real estate as a component of national wealth, its market character, and speci c characteristics as a commodity or an object of investment causes it takes one of the main places in any market economy.
A high level of capital intensity means that especially in commercial and industrial real estate are particularly dominated by institutional investors, such as nancial institutions-companies that invest in real estate and banks.
Although nancial outlays for investments in commercial and industrial real estate are usually the highest in the sector, high capital intensity is also observed for other types of real estate, which often forces nancing from foreign sources.One external source of nancing in the real estate market is banks.e banking sector's involvement in nancing the real estate market also from the willingness to reduce market risk, a positive e ect of nancial leverage and creation of real estate portfolios.
Until the period of transformation in 1989, speci c housing real estate resources had been considered assets with a social aspect that were used to meet housing needs.
e transformation of Poland's system towards a market economy (early 1990s) started the perception of real estate as an object of investment.
Poland started the period of transformation with a relatively low level of housing: in 1991, some 3.6 new housing units (a house or a at) were built per 1,000 inhabitants.e main suppliers of ats were housing cooperatives which built over 83,000 ats.e majority of ats in multi-family construction were built using large-panel technologies.e data published by the Central Statistical O ce (2013) in Poland, Reas (2014), Kongres Budownictwa (2009) and Bank BGŻ (2014) were used for analysis of changes in dynamics of housing construction sector in the period of 1993-2013.e dynamic of changes in housing real estate expressed as a number of housing units built in Poland in 1993 to 2013 is presented in Diagram 1. e number of ats built was decreasing in individual years, reaching its minimum (slightly below 62,000) in 1996 (Kongres Budownictwa, 2009).Since this moment, a slow increase started, reaching the level of 115,000 in 2005.According to Kirejczyk (Kongres Budownictwa, 2009) substantial anomalies were observed in 2003, concerning the high number of housing units built (over 162,000).is number probably results from the inclusion of ca.70,000 to 80,000 detached houses which were claimed in previous years but actually had not been built and settled.
If analysis is restricted only to the ats according to a category speci ed by the Central Statistical O ce as "for rent or sale", the dynamics of changes in the structure of ats built in 1993-2013 points to an increase in the level of developer's building investments ( ats for sale or rent and ca.10% of individual building sector for investment purposes).e data point to progressing marginalization of building activity of cooperatives: gradual decline in the number of ats built by cooperatives: 52.9% of overall number of ats built in 1993 compared to 2.4% in 2013).In the eighties of the 20th century, the cooperatives built 160,000 ats per year, whereas in 2013, this number was 3,500 ats.
According to the statistical data and estimates of the Central Statistical O ce (2013), the number of households in Poland at the end of 2011 amounted to ca. 14.65 million.e total number of housing units built in Poland in 2011 including individual building for investment purposes was ca.13.59 million.e ats-to-household ratio was merely 0.93. is result was similar to that of 2002. is means that within 10 years (2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011), a de ciency of ats was established and, in order to stop this unfavourable trend, it would be necessary to signi cantly increase the number of ats built.Poland is one of the last countries in Europe to have lower number of ats compared to households.
is study uses the data from the Baza Rynku Nieruchomości (BaRN -Real Estate Market Database), Ogólnopolskie Raporty o Kredytach Mieszkaniowych i Cenach Transakcyjnych Nieruchomości AMRON-SARFIN (National Reports on Housing Credits and Real Estate Transactional Prices), Związek Banków Polskich (Polish Banks Association); the analyses and reports by the Komisja Nadzoru Finansowego (KNF -Polish Financial Supervision Authority); and collective data published by Biuro Informacji Kredytowej (BIK -Credit Information Bureau). is study also analyses the data published by the Central Statistical O ce (GUS) and the number of studies containing the data concerning the sector studied.
e data were used for analysis of quantitative and property-based structure of ats built in 2013. is structure was compared with the structure of ats built in the countries of the European Union.
e structures and dynamics of changes were analysed using the comparative method.

SITUATION OF THE POLISH REAL ESTATE MARKET IN THE POSTCRISIS PERIOD COMPARED TO THE EUROPEAN UNION COUNTRIES
In the beginning of 2009, banks started to implement more restricted policies for mortgages.ey ended the practice of lending the equivalent of 100% of the real estate value and became less willing to grant mortgages, or even ceased to grant them.Regular increases in interest rates by the Monetary Policy Council were followed by a rise in the cost of mortgages.Between March 2007 and December 2008, the interest rate for mortgages increased from 5.6% to ca. 8%; between January and November 2009, it fell from 8.24% to 6.79% (KNF, 2006(KNF, , 2007(KNF, , 2008)).
e interest rate for Swiss franc-denominated mortgages has also increased.In the period of November 2007 to January 2009 the interest rate increased from 4.14% to 4.55%; in November 2009, it was 4.05% (KNF, 2010).It was expected that the mortgage portfolio in December 2008 would be 109 billion zlotys, the level of Polish-zloty mortgages would be 46.7 billion zlotys, and mortgages in foreign currencies 62 billion zlotys, with a mean spread for mortgages in Polish zlotys (PLN) of 1.2%.ese prognoses were accurate for two/three quarters of 2008.However, when the crisis started, the mean spread in 2008 rose substantially to 1.72%, and the number of mortgages granted declined substantially.
e global situation and revival in the mortgage market has been seen since 2009.e recession stabilized: in November 2009, for the rst time in seven months, a decline in the average level of spread for Polish zloty mortgages was observed.( e interest rate on a mortgage includes a spread expressed in percentage terms, which is constant throughout the contract period, and the market rate such as WIBOR.)Furthermore, the spread o ered by banks is lower in promotion campaigns for customers who buy additional banking products.ere are also a number of options o ered by banks to reduce or even forgo mortgage banking fees.Additionally, banks have liberalized their approach concerning the required contribution by customers.
e revival in the mortgage market was also manifested by an increase in credit standing, i.e. the maximum amount of money which a bank is willing to grant as a loan to a borrower who meets particular conditions.
All these activities point to a substantial revival in the market for mortgages and consistent improvement in the mortgage situation.In the late autumn of 2009, the post-crisis situation was gradually improving.is contributed to new lending (although in limited scope) by banks, the implementation of an insigni cant number of corrections which were advantageous to customers and support granted to buyers by governmental program "Rodzina na Swoim" ("Family with Its Own Flat") (the programme partially overtook the role of currency-denominated loans in nancing the purchase of real estate).Loan spreads continued to decline but interest rates were relatively steady.Since demand is still dominant in the market, a dynamic increase in the prices of ats was observed in 2010.e sale of ats will, however, increase, especially due to changes in housing preferences among Poles forced by the economic situation (most ats sold in Poland are lower-price).is increase was connected with the limited supply of the most popular types of ats. is increase accounted for 7% of the whole market.Furthermore, banks reported an increase in the number of mortgages granted by ca.10% to 15% per year.
From 2010, cheaper and more accessible mortgages were available.Banks extended their promotion campaigns, often withdrew their fees, reduced spreads and were more willing to nance a greater part of real estate than before.It is worth noting a revival in the terms of mortgages, even despite implementation of the Recommendation T 1 prepared by the Polish Financial Supervision Authority in order to enforce standards for requirements of credit standing of individual customers.e second half of 2010 brought substantially more attractive services and products o ered by banks.ey concerned both reductions in spreads and continued liberalization of the conditions of granting mortgages.
Diagram 2 shows the housing construction sector in Poland in 2009 to 2013, expressed as a number of ats with construction permissions granted in the most recent 12 months, the number of ats with construction started in the most recent 12 months, and a curve that characterizes the supply of ats in the period studied.Diagram 2 shows that the supply of ats, particularly in 2013, was determined by the implementation of the Developers Act at the end of April 2012 ( e Act of September, 2011).e new act is expected to prevent from malpractices connected with concluding and realization of developer's contracts and protect the rights of purchasers in case of developer's bankruptcy.With respect to the investments implemented with so-called developer's system, i.e. from the resources paid by the customers, the money paid will not become the current assets of the developer but they will be redirected to one of the three types of escrow accounts.Escrow account is obligatory.
e resources from the escrow account will be paid to the developer after completion of the investment (in the case of closed escrow account) or after completion of a stage of the investment (in the case of open escrow account or open escrow account with insurance or banking guarantee).In this case, the payment of the part of resources occurs after completion of a speci c stage in advancement of construction works (adequately to its level) after controlling it by the bank.
Furthermore, in the event of developer's bankruptcy, only the people that concluded the preliminary agreement in the form of the notarial deed will be best protected since presence of the solicitor improves the safety of transactions, but preparation of the preliminary agreement in the form of the notarial deed means additional costs for purchasers.
is resulted in an intensi cation of construction works in the beginning of 2012, and then a slowdown in the number of new building sites in the following months.e high number of o ers in the market that followed this situation was maintained until 2013; whereas developers, especially in the rst half of 2013, were not willing to start new investments.erefore, the number of ats under the category "for sale and rent" which were granted construction permissions in 2013 declined by 22.4% YoY, and the number new building sites started decreased by 10.6% YoY (a decline in this category in the rst half of 2013 was even more substantial, 39.5% YoY).
A decline in supply was also con rmed by REAS ( 2014) statistics, which demonstrated that new o ers of sales in 2013 in the six biggest cities in Poland represented over 24,000 ats and was signi cantly lower compared to the mean from recent several years, equal to 35,000 to 37,000 new ats.Moreover, most of the ats o ered for sale in 2013 were still not subject to the requirement of ensuring an escrow account to the purchasers (in the third quarter of 2013, banks had 300 such accounts, i.e. 12% of all investments).As presented in Diagram 2, the number of ats built substantially decreases in the post-crisis period (the lowest level occurs in the third quarter 2011).Furthermore, the number of ats that were started to be built in the period from the third quarter of 2011 substantially rose until the rst quarter of 2013, and then slowed down.
According to Eurostat, comparison of the number of rooms to the number of adults and children living in households represents a criterion for overcrowding.According to the EU Statistical O ce (PZFD, 2012), the problem of overcrowded ats concerned 18% of the inhabitants of the EU and as many as 49% of the citizens of Poland. is di cult situation in the Polish housing market was caused by both overpopulation and low purchasing power in the population.
e average monthly salary in Poland is su cient for buying ca.0.8 m 2 of a at's surface area.An even worse situation is observed in the biggest cities, where the average salary is su cient for buying of ca.0.5 to 0.6 m 2 of a at (Council of Ministers, 2011).In Western European countries, the average salary allows for buying ca. 2 to 3m 2 of a at.In Poland, the purchase of an average-size at requires spending 6-to 8-year salaries, whereas in better developed countries, this can be satis ed with 2.5-to 3.5-year salaries (NBP, Biuro Polityki Makrostabilnościowej, 2014;Łaszek, 2004).
Low incomes and high costs of construction or prices of new ats means that only part of society can meet its housing needs directly in the market.It seems that the only factor that substantially improves nancial capacity of households with average incomes in the housing sector is long-term nancing that adopts the form of a mortgage.Availability of loans, especially mortgage loans, has in recent years increased substantially through competition and progressing economic stabilization, but it is still lower than in highlydeveloped countries.
Driven by limitation of the supply with the increase in demand in the primary real estate market, the period necessary to sell the whole o er of ats reduced in 2013 (from ca.1.5 to 4.4 quarter).e shortest time necessary to sell all the o er of ats from the primary market, which accounts for 4.2 quarter was reported in Warsaw, whereas the longest one was found for Łódź (5.4 quarter) (Bank BGŻ, 2014).Furthermore, with respect to the excess number of the building permissions granted, it can be concluded that the developers are able to improve the statistics of supply soon.
e structure of the supply o er according to the date of completion of the project in 6 months declared by developers (status as of 2013) was presented in Fig. 1. e data presented in Fig. 1 show that the decline in current o ers, with low share of building sites already started with deadline of completion after 2015, must contribute to starting new housing investments.If improvement in the economic status of the country is continued and the demand does not fade away, it should be expected that the increase in new investments year over year should be positive.
Improvement in the economy, with particular focus on very low interest rates with relatively low prices of ats generated in 2013, show a strong demand impulse.e number of residential ats sold by certain leading developers is presented in Table 1.e demand that grew quarter over quarter and accounted for 10.9 ats (according to REAS) in the last quarter of 2013 was comparable with sales in the boom peak, i.e. in the beginning of 2007.In 2013, sales were at the level of 36,000 ats, i.e. an increase of 17.5% YoY, and similar to record gures in 2007.
ese very good results of sales are con rmed by stock exchange developers, who demonstrated increases that have not been recorded since the boom; according to NBP, ca.70% of total sales of ats was covered by large entities.
According to a report by PZFD ( 2012), with respect to ats that were in a bad technical condition necessitating replacement with a new resource (ca.3% of the housing resource whose renovation is unpro table), some 1.5 million ats might be needed in Poland, although governmental estimates 2 in 2011 showed a de cit of even 2 million ats.
Prognosis of the housing de cit in Poland in 2012 -2022 (Forsal, 2011): e lowest costs of utilization in Poland for the year 2010 calculated per 1 square metre of functional surface were found for ats in housing communities (32.6 zlotys), whereas the highest costs were recorded for the assets of the State Treasury (96.0 zlotys) (GUS, 2010).ese data support the thesis that the highest cost e ciency can be observed for ats which are owned by private persons, whereas the ats from public resources are the most expensive and the most poorly managed.e ats from communal resources are also very quickly degraded in technological terms due to the lack of care for ats obtained from the state and poor supervision of these ats.
e above data show that extension of communal resources is uneconomical, whereas the system of communal ats should be replaced by a system for supporting the ability of people with the lowest incomes to rent a at in the free market.is suggestion seems to guarantee prevention of overcrowding, with the overcrowding index for Poland decreasing steadily since 2004.However, it should be noted that this occurred with a reduction in the surface area of rooms added to the market and, since 2010, the number of multi-room ats introduced in the market has been signi cantly reduced.
Reduction in the surface area of ats being built is caused by the reduced purchasing power in the population, itself caused by restricted conditions of granting mortgages and the ratio of prices of ats to incomes in the population.
According to Eurostat (GUS 2010) in 2010 81.5% of the inhabitants of Poland lived in houses and ats that they owned.e mean in the EU was 70.7% and, for the countries of the "old EU", this percentage was only 66.9%.e highest percentage of ats rented in the overall number of ats in the EU is observed in Austria, with an index of 42.3%.e data for Germany are estimated at 44%. e lowest percentage of ats rented in overall number of ats in the EU was recorded in Romania, at 3.5%.e mean share of expenditures in two-person households per at rental costs in Poland, expressed as a ratio of expenditures per at rent to overall total of expenditures of two-person households, amounts to 30% of expenditures, putting Poland at the penultimate place in the EU.
-In Poland: 37.5% of the population that rent ats spend 40% of overall expenditures for rent.
-In Austria: only 10.6% of the population that rent ats spend more than 40% of overall expenditures for rent.-In Romania: 67% of the population that rent ats spend 40% of overall expenditures for rent.
e mean European costs of at rent amounts to 26.5%.In 2011, the barriers for construction activity resulting from the lack of certainty with respect to economic stability became rapidly more serious.It is necessary to take actions to increase opportunities for investment in housing real estate through improvement of the regulations concerning the market of at rent.

SUPPORT FOR MEETING THE HOUSING NEEDS WITH RESPECT TO SOCIAL VISION OF THE MARKET ECONOMY FOR EUROPE OF THE 21ST CENTURY
Since 2014, the substantial drivers for the real estate market have been from governmental projects (Regiodom, 2014): Fundusz Mieszkań na Wynajem (Flats-for-Rent Fund) and the programme of subsidies to mortgages Mieszkanie dla Młodych (Flats for Young People).Bank Gospodarstwa Krajowego (BGK) established an entity named BGK Nieruchomości to manage a fund which is expected to launch in the rst quarter of 2014.According to the announcement of the BGK, the rst ats for rent will be available in the fund in 2014 or 2015.
According to the assumptions, the ats-for-rent fund is expected to buy new and equipped ats in the agglomeration where the needs for rent are the greatest.e focus will be on Warsaw, Kraków, Wrocław, Tricity (Gdańsk, Gdynia and Sopot), Poznań and Łódź.According to Kuszewski (Gazeta Bankowa, 2014), director of the Department of Capital Investments in the Bank Gospodarstwa Krajowego, prospective tenants will pay rent less than the market price by ca.20%.e fund is supposed to operate on market basis.e fund is not intended to buy individual ats but whole buildings.e buildings are expected to include ats up to 60 square metres, including bedsitters, built using technologies adjusted for the needs of the rent market.
In the coming years, BGK plans to invest 5 billion zlotys through the fund. is will allow for building a portfolio of up to 20,000 ats in the biggest cities.On the one hand, the activity of the fund should increase competition in the rental market and lead to a reduction in rent rates.On the other hand, the prices of ats can be increased in the popular segments of the biggest cities (where the fund is intended to operate).
According to the data presented by Eurostat, in Poland only 4% of households live in a at rented under market conditions.A similar situation is observed in other countries of the "new EU". is percentage in the Netherlands, Denmark and Germany ranges from 30 to 40% and accounts for over 50% in Switzerland.
e programme Fundusz Mieszkań na Wynajem (Flats-for-Rent Fund) is aimed at the people who do not have su cient credit standing and cannot a ord to rent ats at market prices.One requirement which has to be met by a tenant is to demonstrate the ability to pay the rent.Accurate prices of rent remain unknown, but they are supposed to be ca.20 to 30% cheaper than the market prices and lower than the mean mortgage instalment.rough negotiation of pro table contracts, the prices for utilities will also be cheaper.
e e e ect on the market from the governmental programme Mieszkanie dla Młodych will be more complicated.e programme Mieszkanie dla Młodych (MdM, Flats for the Young) is expected to help persons under 35 years of age to purchase a rst new at.e young people who buy (from a developer) or build a new at will be eligible to apply for the refund.e state support is expected to nance the young persons' own contribution and repay a part of the credit.
According to the Act adopted at the end of September 2012 by the Polish parliament concerning the governmental programme MdM, childless families and single persons will be refunded 10% of the price of the at from the state.If a family or a single person has children, the refund will reach 15%.If, within ve years from the purchase of the at, a family has three or more children, they will be eligible to apply for another 5%.e refund is supposed to concern ats with a maximum surface of 50 square metres or houses with a surface of 75 square metres and 100 square metres, respectively.Furthermore, families with three children will be able to purchase a at or a house in the primary market with the surface bigger by 10 square metres than de ned for MdM. e state refund would concern 50 square metres of the at.
According to the analysts, the launch of the programmes Mieszkanie dla Młodych (January 1, 2014 to December 31, 2018) and Fundusz Mieszkań na Wynajem (since 2014) should cause an increase in demand in the market for housing real estate.
erefore, it can be expected that these programmes, despite their limited scope, will a ect not only the increase in demand but also the increase in the prices of ats.Little is known to date about the governmental Fundusz Mieszkań na Wynajem and its scope.However, it can be expected that it will represent an additional factor to reduce the supply of ats.
A vision of the market economy for Europe in the 21st century is contained in Strategy Europe 2020 (COM (2010) 2020).It relates to key challenges for the European community, also facing the era of crises and transformation.It is aimed at supporting transformation of the European Union into a smart and sustainable economy with high employment rates and higher social cohesion.e strategy was presented by the European Commission in March 2010 in Europe 2020: e strategy for smart, sustainable and inclusive growth.
Strategy Europe 2020 represents a continuation of the Lisbon Strategy, which determined the programme of reforms of the European Union over the recent decade.It is based on previous achievements of the partnership for economic growth and creation of workplaces and determines new objectives in order to face new challenges.According to the strategy of Europe 2020, the European Union should focus on the most important areas of its policy, where the cooperation between the Member States is likely to ensure the best outcomes.
e construction sector in the European Union generates some 10% of the GDP in the EU by employing 7% of the EU's workforce.European buildings consume as much as 42% of energy and generate 35% of greenhouse gases in the entire European Union.Over 50% of the material extracted from the soil (after processing) is used in the construction sector.erefore, this sector should be the rst to save energy, use renewable sources of energy and limit emission of greenhouse gases.
Sustainable building which focuses on protection of the natural environment and cares for the health and mood of buildings' users has become one of the priority sectors in the European Union.e European Commission included sustainable building into leading sectors (lead market initiative), i.e. the sectors with very high innovation potential and key importance for development of a modern economy in Europe.Both European initiatives and national activities to support sustainable building e ect gradual transformation of the paradigm of research problems in construction (Czarnecki, Kaproń, 2010) through extending the criteria of utility of construction products with numerous ecological aspects with respect for a full product life cycle and facilities where they are supposed to be used.
Today in Poland, few purchasers see the bene ts of the application of energy-saving solutions.e most important determinant for the majority of customers is costs rather than environmental protection.Ecological building seems to be not for developers since many purchasers see the bene ts of energy-saving solutions.However, despite this fact, developers presented in May 2011 examples of ecological solutions where geothermal installations were used, over-standard insulation, recuperation systems, solar batteries, three-pane windows and Velox walls with improved thermal insulation.According to Michał Kudła, an adviser from Home Broker in Gdańsk (Forsal pl, 2011) despite numerous innovative solutions, prices do not di er much from market prices.

CONCLUSIONS
An analysis of the situation in the Polish housing market in the post-crisis period showed that: -in the post-crisis period, a limited supply in the housing market was observed, especially among the most popular types of ats; -since the beginning of 2010, accessibility of mortgages for purchasing ats is increasing; -implementation of the Developer's Act resulted in intensi cation of construction works in the beginning of 2012 and then a slowdown in the number of new building sites in the following periods; -housing de cits, overcrowding and bad condition of ats a ects almost half of the households in Poland; -improvements in the economy in 2013 generated a strong demand impulse in the real estate market; -extension of communal resources in Poland is uneconomical, and the system of communal ats should be replaced by a system for supporting the ability of people with the lowest incomes to rent ats in the free market; -programs for market development in Poland indicate a substantial increase of the surplus of the number of ats by 2020; -governmental projects to support housing needs will strongly a ect intensity of development of the housing market; -the EU's strategy is based on previous achievements of partnership for economic growth, and creation of workplaces and determines new objectives in order to face new challenges; and -sustainable building, as one of priority sectors in the European Union, is numbered among the leading sectors in the European Union (lead market initiative), i.e. the sectors with very high innovation potential and key importance for development of modern economy in Europe.

Diagram 1 .
Structure of housing units built in Poland in 1993-2013 depending on the category of investor (category "other": social housing associations, communal fl ats, company's fl ats) Source: Bank BGŻ (2014)

Diagram 2 .
Housing construction sector in Poland (developers' fl ats, the category by the Central Statistical Offi ce: for sales or rent)Source: Bank BGŻ (2014)

Figure 1 .
Figure 1.Structure off er according to the date of completion of the project declared by the developer (Warsaw, Kraków, Tricity, Wrocław, Poznań, Łódź, status as of the end of 2013) Source: Bank BGŻ (2014)

Diagram 3 .
e number of fl ats per 1,000 inhabitants in Europe (status as of 2011) Source: Instytut Analiz-MRN (2011).e survey concerning housing conditions in Polish households carried out by the Department of Social Surveys and Living Conditions of the Central Statistical O ce in Poland demonstrated that some 20% of the respondents nd their ats too small and 15.4% of them live in the ats with leaking roofs; dank walls, oors, or foundations; or rotten windows or oors.

Table 1
Number of ats sold by selected market leaders among developers