PKO BP: this year’s real estate market prospects are very limited

This year’s market outlook, both for apartment sales and mortgage loans, is limited. On the other hand, 2019 ended with a record-breaking value of loans – said Agnieszka Krawczyk, director of the Mortgage Banking Products Department at PKO BP.

According to the PKO BP analysis regarding the housing market, in the first quarter of 2020 the growth rate of PLN housing loans for private individuals amounted to 12.4 percent.

“Until the end of 2020, it is expected to maintain a relatively high growth rate of lending: the annual increase in the volume of PLN housing loans will amount to PLN 30.3 billion against PLN 35.4 billion in 2019.” – we read.

According to analysts of PKO Bank Polski, in the first quarter of this year prices of flats and houses continued to rise amid high demand and slightly slower supply (e.g. due to the limited availability of attractive plots and wage pressure in construction).

“Restrictions related to the epidemic introduced in the last two weeks of the quarter from 15.03 had little impact on the results of the entire quarter,” it was written.

According to bank analysts, the annual dynamics of transaction prices in seven agglomerations was in the range of 7-16 percent, accelerating against the fourth quarter of 2019 (4-12 percent). “Transaction prices on the secondary market continued to grow faster at a two-digit level,” said the authors of the analysis.

Lending in the first quarter of 2020 “was at a high level from the second-third quarter of 2019”.

According to the data of the Polish Bank Association, the value of newly granted housing loans in Q1 2020 amounted to PLN 16.6 billion, which means an increase of 5.8 percent. compared to the previous quarter and by 22.3% Every year. In the first quarter of 2020, banks granted 56,4 thousand. new loans (an increase of 11.6 percent year on year), and at the end of the quarter the number of active loan agreements was 2.4 million – more by 1.7 percent quarter to quarter and 5.6 percent relative to the same period of the previous year.

“These high results were obtained by mid-March – before the restrictions preventing the spread of the coronavirus epidemic that resulted in the freezing of the housing market – slowing down of transactions for technical reasons (contact restrictions) as well as the likely change in customer behavior (suspension of apartment purchases in conditions of uncertainty related to the epidemic ) “- said the authors of the report.

“Statistics of the Credit Information Bureau (BIK) regarding the number and volume of housing loans for March signal an increase in their number (by 4.6 per cent year-on-year) and volume (by 17.6 per cent year-on-year); in April, however, there was a decrease the number (-23% year-on-year) and volume (-15% year-on-year) of these loans. Recently published BIK data for May signal the continuation of a decrease in the number of loans granted (-29% year-on-year) and volume (-22 year to year).

“2019 was a very good year for the sale of mortgage loans,” Krawczyk said.

“Last year ended with a record-high value of sold housing loans in history – over PLN 61 billion, when earlier forecasts were about PLN 55-56 billion” – she added.

Krawczyk pointed out that the prospects for the current year were also very promising, which included: very low unemployment, consumer openness to incurring liabilities, low interest rates or interest on deposits not encouraging to save cash.

“January, February and even March 2020, when earlier transactions were also closed, were also very good in terms of selling housing loans and concluding purchase transactions on the market,” she said.

“The outbreak of the pandemic was a shock for potential buyers – withdrawing from the transaction for fear of future settlement of obligations, or hindering the implementation of the transaction, in the form of even viewing premises or meetings with a notary” – she added.

According to Krawczyk, April was a month with a large downward trend, expecting what will happen next, however, the first major movements on the market could be seen after the picnic, both in construction works as well as development transactions and on the secondary real estate market.

“We will have full data after the end of the quarter, but after the sale of loans it can be seen that 17% less loans were sold in April than in March, it seems that this decline will continue in May” – said the expert of PKO BP.

“April was a month of decline not only in the real sale of loans, i.e. signed loan agreements, but also in a much lower number of new loan applications. So the market expansion in May will be visible only in June data due to the approximately one-month transaction closing period” – she added.

“In terms of prospects, it can be said that in terms of offer, the market stood at the end of March” – commented Krawczyk. “It was largely influenced by the fact that both developer offices and offices were closed for a long time. Customers, too, for fear of financial future withdrew from the transaction, which put developers in a difficult position to finance their projects from their own resources” – she noticed.

According to Krawczyk, uncertainty about the economic situation changes the attitude of both consumers, developers and investors. “We are currently observing a decline in demand, with a large” production “of housing in progress, which may mean a fall in housing prices in the coming quarters,” she pointed out.

“Of course, the scale of the decline depends on how deep the recession will be in the entire economy, as well as the real financial condition of developers” – said Krawczyk.

“Another important variable is the rental market, which is the decrease in income from rent in the recent period. When financing investment properties through loans, this may mean problems with servicing obligations and sale of these properties for some,” she added.

According to Krawczyk, property prices will continue to be displayed at current levels, although transaction prices may fall slightly over the coming months.

“After the outbreak of a pandemic, some banks changed their offers, e.g. most banks require a higher 20% and even 30% own contribution with previous requirements oscillating at 10%” – Krawczyk commented.

In her opinion, this year’s market outlook, both for sale of apartments and mortgage loans, is limited.

“A lot depends on what happens with the pandemic, there is already loud talk about the second wave of coronavirus,” said the director.

“Fear that has rooted in customers after the spring wave of the epidemic may mean that consumers will be more cautious about any long-term investment. Let’s hope, however, that after a temporary breakdown everything will return to normal, the real estate sector will grow dynamically, the labor market it will remain stable, consumer moods will soar and we will rebuild all the declines we are currently observing next year, “she concluded. (PAP)

Author: Piotr Gozdowski

pgo / skr /

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