Information on home prices and the situation in the housing and commercial real estate market in Poland in 2017 Q3

Transcription

1 December 217 Information on home prices and the situation in the housing and commercial real estate market in Poland in 217 Q3 Jacek Łaszek Hanna Augustyniak Krzysztof Olszewski Joanna Waszczuk Marzena Zaczek Economic Analysis Department

2 The Report has been prepared at the Economic Analysis Department for the purposes of NBP authorities. The opinions expressed in this report are the opinions of the authors and do not present the point of view of the authorities of.

3 The analysis of the situation in the property market in Poland in 217 Q3 1 leads to the following conclusions: Heightened activity in the housing market continues with persistently high levels of real estate demand and supply in the largest markets. This activity has not generated excessive tensions in the property market so far, yet the growing mismatch between housing supply and high housing demand was accompanied by modest price increases. Transactions continued to be financed by a significant share of buyers own funds, yet lending increased noticeably. The average offer and transaction prices per square metre of housing in the primary and secondary markets increased in the analysed period. The observed price hikes in the primary market were due to the fact that a larger number of better quality dwellings in better locations were put on the market and sold (rental housing located in city centres accounted for a large proportion of these). The price trends observed in the secondary market were similar to those in the primary market. Prices calculated with the use of the hedonic index 2 increased slightly in 6M (2.5% y/y and 6.2% q/q respectively), which means an actual rise in prices per square metre of similar type of housing compared to the previous year. In all the analysed groups of cities (Warsaw, 6M, 1M) prices in the primary market were higher than in the secondary market, with the difference between average transaction and average offer prices declining. Average rents (both offer and transaction rents) per square metre of housing increased in the analysed quarter, which resulted from a higher share of dwellings in a good location, with a better structure and quality, and also higher demand for such dwellings. The index of the estimated availability of housing in large cities fell slightly in the analysed quarter to.84 square metres, but was still.35 square metres higher than the record low observed in 27 Q3 (as a result of an increase in home prices). The index of the estimated maximum availability of a housing loan 3 to average households in Warsaw and in 6M remained almost stable. The index of loan-financed availability of housing in Warsaw and 6M declined slightly. 1 The analysis carried out in the present Report is based on data available till 217 Q3. On account of delays in access to data, some figures include data until 217 Q2 (inclusive). Data series with average prices per square metre of housing, commercial rents and transaction prices per square metre of office space reflect the available pool of data and may be subject to revision according to the new incoming data. These series are being constantly updated so as to reflect the full pool of data available at any given moment. Historic data are also subject to change due to revision of data for errors. Such an approach is used by other central banks and statistical offices. 2 The hedonic index of home prices is adjusted for differences in various attributes of dwellings (e.g. location, usable area, standard of finishing) sold in particular periods. The hedonic index is calculated with the use of the imputation method. A hedonic price is an average transaction price from the base period multiplied by the hedonic index. More information in the article by M. Widłak (21) Metody wyznaczania hedonicznych indeksów cen jako sposób kontroli zmian jakości dóbr [ Methods of computing hedonic price indices as the way to control changes in goods quality ], Wiadomości Statystyczne no The maximum housing loan available in a particular market is a measure expressed in PLN thousand, taking into account banks lending requirements and loan parameters (i.e. interest rate, amortization period of 25 years, minimum wage understood as the minimum income after the repayment of loan instalments). The assessment does not take into consideration changes in banks lending policy, including lending terms and criteria. 1

4 Housing investment (excluding transaction costs) continued to be profitable in the short term. Assuming the average rent possible to be negotiated in the Warsaw market and in the market of 6M, the profitability of housing investment was higher than the interest on banking deposits and yields on 1-year government bonds, and was close to the return likely to be achieved in the commercial property market. The relation of the housing debt servicing costs to rent still enables to finance the cost of credit with income from rent. The value of newly granted loans 4 in PLN (excluding renegotiated agreements) in the analysed quarter stood at 5 approx. PLN 11.8 billion, i.e. 2.8% lower as compared with figures from the previous quarter and 22.4% higher as compared with 216 Q3 figures. The results of the NBP survey concerning the situation in the credit market 6 indicate that the surveyed banks slightly tightened their criteria of granting housing loans. At the same time, banks cut non-interest credit costs and eased the conditions not examined in the survey, i.e. concerning liberalization as regards documentation needed in the credit granting procedure. In 217 Q4 individual banks envisage an increase in demand for credit and announce there will be no changes in the lending policy. The quality of housing loans in PLN continues to be high, and the share of impaired loans in PLN remained at approx. 2.5% at the end of 217 Q3. Since 212 the share of FX denominated loans 7 has been on a steady decline in the structure of housing loans in banks, which is favourable for financial and macroeconomic stability. The decreasing share of FX loans is due to the fact that banks ceased to grant such loans to persons not being in receipt of a regular income in the given currency, as well as due to systemic amortization, earlier repayments, and refinancing those loans with PLN denominated loans. The quality of FX housing loans is still high the share of impaired loans increased slightly and stood at approx. 3.4% at the end of 217 Q3. The estimated profitability of housing investment projects was high and increased slightly. This was related to high demand for housing, the growing share of buyers advance payments, the accumulation of the stock of land for the construction of new housing projects 8, and the ratio of home prices to building materials and construction costs, which so far favours real estate developers. Financial data of real estate developers usually indicate low profitability of their opera- 4 Data concerning new loans prepared by NBP are available on the NBP internet site: in the "4 OPN2PLN" tab. It should be remembered that a housing loan frequently compliments the financing of housing (part of financing comes from the sale of another property). 5 According to BIK data, in 217 Q3 there was a 5.2% increase in the number of housing loans (y/y) extended by banks and their total value increased by 11.7%. 6 Situation in the credit market - results of the senior loan officer opinion survey in 217 Q4, NBP, October The share of FX denominated loans in the structure of housing loans extended by banks until the end of 217 Q3 stood at approx. 36 % as compared to 71% recorded in 29 Q1. 8 The pool of land owned by real estate developers must be replenished constantly due to high production and sales. The Act of 14 April 216 on the suspension of the sale of Agricultural Property owned by the State Treasury and on the amendment of certain acts (Journal of Laws 216, item 585, as amended) may hamper this process. Soon, real estate developers will be building on lands which has been defined as intended for housing construction in local area development plans, which may impact both costs and prices. 2

5 tions, a claim not corroborated by the analysis carried out on average investment projects in the largest markets. It points to a very high level of estimated profitability of developer projects in housing construction as compared to other branches of industry. The estimate results are confirmed by the high number of newly commenced and finalised investment projects and the purchase of rental housing by professional external investors. 9 According to Coface experts, the three quarters of 217 saw an increasing number of bankruptcies in the construction industry. 1 The pool of unsold housing in Poland s six largest markets 11 increased slightly again in the analysed quarter and stood at 5.8 thousand. At the same time, the number of dwellings whose construction had been launched 12 increased, which indicates that real estate developers try to match the size of production to demand. The home selling time in the primary market 13 in 6M decreased to less than 2.8 quarters in the analysed period. 14 The number of homes under construction and the number of projects under construction weighted by sales volume as well as the number of completed dwellings put up for sale decreased, which is likely to pose a risk to price growth. 217 Q3 saw an increase in the number of new home building permits, including those in existing projects. The estimated high margins on developers' profits as well as rates of return on housing projects and high demand contributed to the increase in the number of issued home building permits 15 and the number of dwellings ready for occupancy 16. High home sales make it necessary to replenish land banks. High demand in this market contributed to a considerable rise in the prices of land for developer construction particularly in city districts with good transport links, with well-developed urban infrastructure and retail and service facilities. In the housing market, there is a growing mismatch between housing supply and high demand for housing. A drop in the share of finished flats in the offer on the market and a decline in production in progress (adjusted by current sales) was observed. Also, the structure of dwellings offered deviates from buyers preferences (too many large dwellings in relation to the demand for 9 For example, a big foreign real estate fund which bought the second housing project in Poland. Buildings bought in Warsaw and Krakow serve as rental housing. 1 In 216 a new restructuring law was introduced. At present, the restructuring procedure applies both to insolvent companies and to companies threatened with insolvency. According to Coface experts, the increase in the number of bankruptcies among construction companies in the three quarters of 217 was driven by such factors as growing costs of materials, shortage of qualified workers, the markedly delayed recovery in investment and the introduction of the VAT reverse charge on construction services. Many companies may find it difficult to meet increased demand for construction services due to the shortage of labour. Being forced to wait for VAT refund, many companies faced problems with the timely payment of their liabilities. In the second half of 217 the situation stabilised somewhat and the impact of changes in the bankruptcy law should be much smaller on bankruptcy statistics. 11 According to the REAS report entitled "The housing market in Poland in 217 Q3". 12 According to GUS data, in 217 Q3 in Poland the construction of 54.8 thousand homes was started, i.e. approx. 8 thousand more in comparison with 216 Q3 and approx. 7 thousand less compared to the previous quarters. 13 The index of home selling time in the primary market calculated by REAS is the ratio of the number of homes on offer at the end of a quarter to the average sales from the previous year. 14 Similarly to the primary market, also the secondary market saw the home selling time get shorter. 15 According to GUS data, 59.8 thousand home building permits were issued in 217 Q3, i.e. approx. 3.6 thousand more than in 216 Q3, yet approx. 1.6 thousand less than in the previous quarter. 16 According to GUS data, in 217 Q3 a total of 45.6 thousand homes were completed and made ready for occupancy, which is approx. 7 thousand more compared to 216 Q3 and approx. 7.7 thousand more than in the previous period. 3

6 them). There are also signs of changes in terms of production factors, such as increases in estimated prices of construction sites for multi-family housing and emerging problems with the availability of labourers for construction companies and the shortage of building materials. This is confirmed by the results of a survey addressed to housing developers (Annex No. 1). Maintaining flexible supply with such a high demand is the main challenge of the current market situation and the condition of maintaining stable prices. Despite the increase in sales volume, the production of dwellings in progress is not growing proportionally, and the number of dwellings completed in the developer offer is declining, as is the home selling time. As a consequence, the position of the home buyer is weakening, which is reflected in increasing deviation of the structure of the offered dwellings in relation to demand and the decreasing difference between offer and transaction prices in both markets. Under the gradually phased out MDM government-subsidized scheme, since 214 a total of approx. PLN 2.1 billion worth of subsidies have been paid to 81,771 borrowers. 17 On 8 August 217, BGK started to accept applications for the pool of housing subsidies unused in As the offer enjoyed exceptional interest, BGK had to stop accepting applications on the very next day. In January 218 the bank will start to accept the last applications for subsidies under the MDM government-subsidized scheme. Buyers' considerable interest in the disbursement of subsidies in 216 may be attributed to the scheduled discontinuation of the scheme after 218. Given the strong demand, the government's withdrawal of fiscal stimulus provided to this market may be considered a positive phenomenon. In 217 Q4 numerous changes in prices per square metre of dwelling eligible under the MDM scheme 19 were noted. However, as the funds available for subsidies in 217 have been exhausted, this should not affect the housing market. In 217 several initiatives were launched as part of the National Housing Programme 2, adopted by the government in September 216 (see Table no. 1). 17 According to the post-audit conclusions of the Supreme Audit Office, the majority of beneficiaries of the MDM housing scheme throughout its implementation period were childless households (77% before the amendment and 72% after the amendment). 18 In accordance with the Act of 7 July 217 (Journal of Laws item 1413), as not all the funds available under the current disbursement limit were used (95% of the value of submitted applications), the principle of accepting 1 of applications was introduced. 19 Identification in the NBP database of transactions concluded in the period 216 Q4 217 Q3 involving housing whose area and price meet the conditions of the "Housing for Young" scheme, taking into account the breakdown into the primary and secondary market, made it possible to determine eligibility under the programme in 16M. The largest number of transactions in the primary market meeting the conditions of the programme in the discussed quarter were recorded in Zielona Góra and Kielce, while the largest number of transactions in the secondary market were recorded in Kielce, Zielona Góra and Katowice. The lowest availability of housing in the primary market in Poland was recorded in Łódź and Warsaw, and in the secondary market in Warsaw and Kraków 2 On 27 September 216, the Council of Ministers approved resolution No. 115/216 on the adoption of the National Housing Programme. The main objective of the National Housing Programme is to make housing more accessible to low- and middleincome earning persons and to improve the technical condition of the housing stock while, at the same time, increasing its energy efficiency. A more detailed description of the assumptions of the National Housing Programme is provided in the Information on home prices and the situation in the housing and commercial real estate market in Poland in 216 Q3 (NBP, December 216). 4

7 Table 1 Government s initiatives concerning housing real estate Programme National Housing Programme 1)Housing Plus Scheme 1.1) Programme supporting social housing, sheltered housing, shelters and homes for the homeless Legal basis Journal of Laws of 215, item 833 as amended Commencement of the programme 27 Expected expenditure 6 21 million PLN in Expected effects Current effects projects were deemed eligible for financing under the scheme (the total value of projects exceeding PLN 2.8 billion) for the creation of 23 thousand night shelters 1.2) Programme supporting the construction of municipal housing Journal of Laws of , item billion PLN during 1 years 3 thousand dwellings during 1 years Until now, under the programme: - 15 applications have been submitted for the total amount of PLN 832 million for the construction of 6872 dwellings - 44 loan agreements have been signed for the total amount of PLN 197 million destined to finance 1821 dwellings 1.3) Housing Plus funding from BGK Real Estate Resolution of the Council of Ministers no. 115/216 of 27 September thousand dwellings under construction, 1 thousand being prepared for construction (under investment contracts) 2) Individual Housing Accounts Other scheme (outside the National Housing Programme) Housing for the Young Journal of Laws of 217 of , item 1184 as amended Programme in preparation 214 Premium payouts in the amount of 4.41 billion PLN in billion PLN in On a cumulative basis since , the total of approx. 82 thousand beneficiaries benefited from the programme; subsidies amounted to 2.1 billion PLN, including.7 billion PLN for the secondary market housing Borrowers Support Fund Journal of Laws of , item million PLN On a cumulative basis since , the total of 75 subsidy agreements were concluded for the amount of 15.7 million PLN and subsidies in the amount of 8.7 million PLN were paid Rental Housing Fund Own initiative of BGK 214 Contracts for the construction of 3.3 thousand dwellings were signed dwellings were made available for sale on a commercial basis The project concerning Individual Housing Accounts (IKM) 21 is pending a decision to be qualified to the Council of Minister s legislative works. In accordance with the announcement of Deputy Minister of Family, Labour and Social Policy, a pilot programme of subsidies to sheltered housing (used by the elderly and the disabled) run by the local governments was supposed to be launched in mid-217. A total of PLN 2 million was allocated for this purpose. It has not been decided yet in which cities the programme will be launched. The commercial real estate market continued to see growing imbalance resulting from oversupply of rental space as compared to fairly stable demand. This concerned in particular the rental of office space and retail and service premises. The continued high availability of foreign financing contributed to the rapid growth in fixed assets. This can be largely attributed to low interest rates in developed 21 In accordance with the information published on the website of the National Housing Programme, in the years the government plans to set aside PLN 4.41 billion for the disbursement of bonuses to Individual Housing Accounts. 5

8 countries, and thus low opportunity cost. The value of transactions in 217 Q3 exceeded EUR 7 million; from the beginning of the year investment transactions totaled EUR 2.35 billion. Half of the transactions were commercial space investments and 3 office space investments. 22 The level of corporate loans for real estate investment amounts to PLN 53 billion; these loans comprised loans granted to real estate developers, for office space and other real estate. The level of debt of real estate developers and debt resulting from loans for office space was stable, whereas the level of loans for other real estate increased by over PLN 2 billion as compared to 217 Q2. The quality of loans to developers has improved somewhat, and the high rate of impaired loans (2) is mainly due to the fact that banks loan portfolios include loans from previous years. 23 The share of impaired loans in the total loans for office real estate has been on the rise since the beginning of 217 and now stands at 8.6%. On the other hand, the share of impaired loans in the total loans for other real estate has been slightly diminishing and stands at 8.5%. Rents for A class office space in Warsaw, quoted in EUR per square metre per month, declined slightly. On the other hand, rents in class B office buildings in the largest markets are on a steady downward trend, whereas those in smaller markets have increased somewhat. As a result of intensified activity of lessees, the vacancy rates in the whole of Warsaw dropped by 1 p.p. to reach 12.9% at the end of 217 Q3. 24 This level may still be considered elevated. Rents for retail space in shopping centres across the country show a slight downward trend. On the other hand, in large cities rents for retail space of 1-5 square metres in shopping centres located in economically important parts of cities remain stable. As regards the sale of small retail and commercial real estate, the median of the offer price all over Poland shows a slight upward trend. 22 The above investments concern the sale of the whole company which leases a building and generates profits on it. Such transactions take place between: 1/ a real estate developer who commercialized the real estate and sells it to an investor or 2/ two investors. Yet, it should be emphasized that these data do not make it possible to draw conclusions on foreign investors share in commercial real estate in Poland. There is a large stock of real estate built by the owner for their own purposes, sometimes even decades ago. Also, some domestic investors establish a real estate development company which builds for them rental real estate and then manages it. The above economic developments are not recorded in commercial investment statistics. 23 See Financial Stability Report, NBP, July See Raport Colliers International: Market Insights, 217 Q3, Poland. 6

9 The figures below describe the key developments in the housing market in Poland s major cities in 217 Q3. Charts and figures present: 1) home prices (Figures 1 14), 2) availability of loan-financed housing, loan availability, profitability of housing investment (Figures 15 2), 3) mortgage loan disbursements and interest rates (Figures 21 28), 4) operating profitability of housing and real estate development projects, costs of construction and assembly output and economic situation of real estate developers in Poland (Figures 29-46), 5) housing construction and the residential market in selected cities in Poland (Figures 47 6), 6) housing policy (Figures 61-72), 7) commercial real estate (Figures 73-77). The analysis of housing prices (offer, transaction and hedonic) in the primary and secondary markets as well as housing rents relies on the data acquired from the housing market survey of the Real Estate Market Database (BaRN). 25 On the other hand, as part of the survey of the commercial real estate market, the Commercial Real Estate Market Database (BaNK) data on rent, offer prices and transaction prices of commercial real estate are collected and analysed. In addition, data from PONT Info Nieruchomości, AMRON and SARFIN, Polish Banks Association and Comparables.pl were used in the analyses. The authors drew on the reports issued by REAS, the Polish Financial Supervision Authority (KNF) as well as aggregate credit data released by the Credit Information Bureau (BIK). The statistical data published by the Central Statistical Office (GUS) and analyses including sectorial data have been used in the structural analysis. Since 217 Q3, the quarterly report on the real estate market has been adjusted to data availability, which means that contents in particular quarters may differ. In Q1 and Q3 the report will contain a more extensive description of the commercial real estate market, whereas in Q2 and Q4 the real estate development sector and prices of land for multi-family construction will be described in more detail. 25 The survey of prices of housing and commercial real estate in selected cities of Poland in 216 Q1 was announced in the Decree of the Council of Ministers of 27 August 214 concerning the Programme of statistical research of public statistics for 215 (Journal of Laws of 214, item 133, number (73). The obligation to submit statistical data results from Article 3 item 3 of the Act of 29 June 1995 on public statistics (Journal of Laws of 212 item 591) and from the Decree of the Council of Ministers referred to above. The reporting forms for 217 were announced in the Decree of the Prime Minister of 14 March 217 on reporting forms, completion instructions and statistical questionnaires and questionnaire forms used in surveys of public statistics for 217 (Journal of Laws of 217 item 837). Since the survey is carried out by NBP, the Bank publishes the surveys on its website. In listings concerning 217 Q3, approx thousand records were collected, including approx. 24.2% of records concerning transactions and 75.8% of records concerning offers. Altogether approx. 2.6 million records were collected in the base, including 21.3% of records concerning transactions and 78.7% of records concerning offers. 7

10 List of abbreviations 5M 6M 7M 1M BaNK BaRN BIK CPI DFD GD GUS IRR EURIBOR FMW KNF KRS LIBOR LTV MDM IFRS NBP PONT REAS RNS RP PAS RW ROE WIBOR WIG2 ZBP ZKPK 5 biggest cities: Gdańsk, Kraków, Łódź, Poznań, Wrocław 6 biggest cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań, Wrocław 7 biggest cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań, Warsaw, Wrocław 1 big cities: Białystok, Bydgoszcz, Katowice, Kielce, Lublin, Olsztyn, Opole, Rzeszów, Szczecin, Zielona Góra Commercial Real Estate Market Database Real Estate Market Database Credit Information Bureau Consumer Price Index Large real estate development company Households Central Statistical Office Internal Rate of Return Euro Interbank Offer Rate Rental Housing Fund Polish Financial Supervision Authority National Court Register London Interbank Offered Rate Loan-to-Value ratio Government-subsidized housing scheme Mieszkanie dla Młodych [Housing for the Young] International Financial Reporting Standards PONT Info Nieruchomości Real Estate Advisory System Government-subsidized housing scheme Rodzina na Swoim [Family on their own] Primary housing market Polish Accounting Standards Secondary housing market (Existing housing stock market) Return on Equity Reference interest rate of loans in the Warsaw Interbank Offered Rate Index including top 2 companies listed on the Warsaw Stock Exchange with the highest value of publicly traded shares Polish Bank Association Accumulated index of changes in banks credit policy criteria 8

11 II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II 1. Transaction, hedonic, and offer prices of housing, the primary market (PM), and the secondary market (SM) Figure 1 Transaction prices per square metre of housing in 7M PM (PLN/sq. m) Figure 2 Transaction prices per square metre of housing in 7M SM (PLN/sq. m) Gdańsk Gdynia Kraków Łódź Poznań Wrocław Warszawa Note: the home price database of NBP (BaRN) has existed since 26 Q3; a description of the database can be found in the report Information on home prices and the situation in the residential and commercial real estate market in Poland in 216 available on the bank s website. Figure 3 Weighted average price per square metre of housing, offers and transactions PM (PLN/sq. m) Gdańsk Gdynia Kraków Łódź Poznań Wrocław Warszawa Figure 4 Weighted average price per square metre of housing, offers, trans and hedonic SM (PLN/sq. m) Warszawa RPT 6M RPT 1M RPT Warszawa RPO 6M RPO 1M RPO Note to Figures 3 14: the price weighted with the share of housing in the market stock, the average price for Warsaw. Figure 5 Ratio of the average weighted transaction price per square metre of housing PM to SM 1,25 1,2 1,15 1,1 1,5 1,,95,9,85,8 Warszawa RWT 6M RWT 1M RWT Warszawa RWO 6M RWO 1M RWO Warszawa hed. 5M hed. 1M hed. Figure 6 Ratio of the average weighted offer price to transaction price per square metre of housing PM and SM 1,35 1,3 1,25 1,2 1,15 1,1 1,5 1,,95 1,2 1,,8,6,4,2 Warszawa 6M 1M O/T Warszawa RP O/T 6M RP O/T 1M RP O/T Warszawa RW O/T 6M RW O/T 1M RW O/T Warszawa (RH)(P.oś) O/T 6M (RH) (P.oś) O/T 1M (P.oś) (RH) 9

12 II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II II Figure 7 Index of the average weighted transaction price per square metre of housing in the PM to CPIdeflated price (26 Q3 = 1) Figure 8 Weighted average weighted and real price per square metre of housing in the SM to CPIdeflated price (26 Q3 = 1) Warszawa RP T 6M RP T 1M RP T Source: NBP, ZBP (AMRON), GUS. Warszawa RP T defl. CPI 6M RP T defl. CPI. 1M RP T defl. CPI Figure 9 Weighted average price per square metre of housing in SM and price adjusted by the hedonic index Warszawa RW T 6M RW T 1M RW T Source: NBP, ZBP (AMRON), GUS. Warszawa RW T defl. CPI 6M RW T defl. CPI. 1M RW T defl. CPI Figure 1 Weighted average price per square metre of housing in SM, adjusted by the hedonic index (in 6M) Warszawa hed. 6M hed. 1M hed. Warszawa RW 6M RW 1M RW Figure 11 Average offer prices per square metre of housing PM (selected markets) Gdańsk hed. Kraków hed. Łódź hed. Poznań hed. Warszawa hed. Wrocław hed. 6M hed. Figure 12 Average offer prices per square metre of housing PM (Warsaw and 6M) Warszawa 5M 1M Note to Figures 11-12: prices are collected from all available sources. Source: PONT Info Nieruchomości. Wrocław Łódź Kraków Warszawa Gdańsk Gdynia Poznań Source: PONT Info Nieruchomości. 1

13 zmiana w % II II II II II II II II II II II II Figure 13 Average offer prices per square metre of housing, new housing contracts PM (selected markets), (PLN/sq.m) Figure 14 Average rent rates (offer and transaction) per square metre of housing in SM (left-hand scale) and estimated profitab. in rental housing (right-hand scale) in selected cities (PLN/sq. m) , 8,5% 8, 7,5% 7, 6,5% 6, 5,5% 5, Łódź Kraków Poznań Trójmiasto Wrocław Warszawa śr.6m avg. Note: prices refer only to new contracts put on the market for the first time. Source: REAS. Warszawa av.rent 6M av.rent 1M av.rent Warszawa ROE(RH) 6M ROE (RH) 1M ROE (RH) Note: the analysis does not take into account the high transaction costs in the housing market and the potentially long time needed to exit from such an investment. 2. Availability of loan-financed housing, loan availability, profitability of investment in housing Figure 15 Estimated availability of loan-financed housing (7M) Figure 16 Quarterly changes (in %) in the estimated availability of loan-financed housing in 7M and the force and direction of the impact of particular components 15% 1 5% -5% -1-15% -2 Gdańsk Gdynia Kraków Łódź Poznań Warszawa Wrocław śr.7m avg. avg. cena price (śr.rp RP i RW) i income wynagrodzenia max. maks.udział share of dochodu income for przezn.na loan repayment spłatę interest stopa procentowa rate loan kredytowa housing dostępność availability mieszkania Available housing loan a measure (;expressed in PLN thousand) specifying the potential maximum housing loan in a particular market, taking into account banks lending requirements and loan parameters (i.e. interest rate, depreciation period, minimum wage as the minimum income after payment of loan instalments). Availability of loan-financed housing a measure specifying how many square metres of housing may be purchased with a mortgage loan obtained based on the average monthly wage in the enterprises sector in a particular market (GUS), in view of the bank s lending requirements and loan parameters (interest rate, depreciation period, social minimum understood as the minimum income after payment of loan instalments) at an average transaction price of housing (4 in th PM and 6 in the SM) in a particular market (BaRN). The pace of changes of the index and differences between particular markets provide important information. ZKPK Index accumulated index of changes in banks lending policy criteria; positive values mean easing, and negative values tightening of lending policy as compared to the initial period, i.e. 23 Q4. Computing methods are described in the Financial stability report, December 212, NBP. Source: NBP, GUS. Source: NBP, GUS. 11

14 I 25 tys. zł Figure 17 Estimates of available weighted mortgage loans and accumulated index of changes in banks housing loan policy (ZKPK, right-hand scale) Gdańsk Gdynia Kraków Łódź Poznań Warszawa Wrocław avg. śr.7m 7M waż.bud. weigthed by ZKPK indeks index ZKPK (RH) new housings Source: NBP, GUS. Figure 19 Profitability of home rental (average in 7M) as compared with alternative GD investments 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1,, Figure 18 Profitability of housing loans for the consumer deflated with CPI or wage growth in the enterprise sector 8% 6% 4% 2% -2% -4% -6% -8% nominal nom.st.proc.kred.mieszk.pln interest rate, housing loan real.st.proc.kred.mieszk.pln interest rate, housing loan CPI defl. def. CPI real.st.proc.kred.mieszk.pln interest rate, RNS/ MDM housing dla loan kred.rns CPI defl. / MDM def.cpi real.st.proc.kred.mieszk.pln interest rate, RNS/MDM housing loan dla kred.rns CPI defl. by earnings / MDM def.dyn.wynagr.(wyrówn.) real.st.proc.kred.mieszk.pln interest rate, housing loan CPI defl. def. by dyn.wynagr.(wyrówn.) earnings Note: values below denote a negative real interest rate for the borrower; the red lines separate the one-year period where there were no government subsidised housing programmes, i.e. the RNS scheme (operating between ) and the MDM scheme (operating between ). Source: NBP, GUS, BGK. Figure 2 Estimated demand for housing in PM (average in 7M) and its components rental najem to do household opr.kred.mieszk.gd housing loan rental najem as do to commercial stopy kap.nier.kom. property cap. rate rental najem to do household opr.dep.stan deposits GD rental najem to do 1-y. opr.obl.1l. bonds rental najem to do households inw.finans.gd fin. investment popyt estimated całkowity total demand szacowany (l.oś) popyt consumer konsumpcyjny demand (RH) (p.oś) popyt speculative spekulacyjny demand (RH)(p.oś) real popyt total całkowity demand rzeczywisty (l.oś) investment popyt inwestycyjny demand (RH) (p.oś) Note to Figure 19: a value exceeding than 1 means higher profitability of investing in housing for rent to third parties than investing capital in iother investments. This analysis does not take into account the high transaction costs in the housing market and the potentially long payback periods. Note to Figure 2: total estimated demand consists of consumer demand 6, investment demand 3, and speculative investor s profit 1; the weights were estimate by experts; the index presents the moving average of two consecutive quarters. Source: NBP, GUS. Source: NBP, GUS. 12

15 I 25 I 25 I 23 I 24 I 25 I 25 wartość w mld zł liczba w tys. mld zł I 24 I 25 I 23 I 24 I Disbursement of housing loans, interest rates Figure 21 Balance and quarter-on-quarter changes in housing loan receivables from GD after adjustments and currency structure of quarter-on-quarter increases in housing loan receivables (PLN billion) Figure 22 Currency structure of housing loan receivables from GD resulting from residential housing loans (%) FX housing loan PLN housing loan PLN housing loan quarterly change (LH) FX housing loan quarterly change (LH) PLN housing loan stock (RH) in which FX housing loan stock (RH) Figure 23 New housing loans: value and number Figure 24 Territorial structure of the value of new housing loan contracts in Poland wartość number of PLN PLN loans (RH) liczba value of PLN PLN loans (LH) w number tym wartość of FX loans walutowe (RH) w value tym of liczba FX loans walutowe (LH) Note to Figures 23 and 24: the data inform about signed residential mortgage loan contracts and not the actual disbursement of residential mortgage loans. The third quarters are marked by red points. Source: ZBP, prepared by NBP. Source: BIK. Figure 25 Interest rates on housing loans for households in Poland 9% 8% 7% 6% 5% 4% 3% 2% 1% Warszawa 6M 1M PP Polska Poland, (RH) (P oś) Figure 26 Bank margins (for WIBOR, LIBOR, EURI- BOR 3M) in the case of housing loans 4,5% 4, 3,5% 3, 2,5% 2, 1,5% 1,,5%, PLN new nowe CHF new nowe EUR new nowe Serie1 PLN stock CHF stock stany Note: Foreign currency loans practically ceased to be granted in 212 %PLNnowe new WIBOR3M - %CHFnowe-LIBOR3M new %PLNstan stock - WIBOR3M %PLNnowe-st.dep.GD % sock deposit rate stany (stock of %%PLNstan-st.dep.GD stock WIBOR3M stany households loans ) Note: the bank margin is the difference between the housing loan rate (according to NBP data) and the WIBOR3M or LI- BORCHF3M rate. 13

16 Tabela 2 Estimated gross mortgage loan disbursements to households in Poland and estimated value of cash and loan-financed purchases of developer housing in 7M (in PLN million) Date Estimated value of mortgage loans in Poland Estimated value of housing transactions in the PM in 7M Estimated value of disbursed housing loans with client s down-payment for home purchase in the PM in 7M Estimated value of cash home purchases in the PM in 7M Estimated share of cash home purchases in the PM in 7M % I % II % IV % % I % II % IV % % I % II % IV % % I % II % IV % I % II % Note: The estimates are based on the following assumptions: In the period April 212 April 214, the estimated value of newly granted loans in Poland in particular quarters was based on increases in the volume of loans to households adjusted for loan amortization and flows between the foreign currency loan portfolio and the zloty loan portfolio, available in the NBP reporting. The entire banking system was taken into account, including SKOK credit unions. Since 215 Q1, the value of disbursements has been estimated based on data collected from banks. In order to calculate the estimated value of PM transactions in 7M (Gdańsk, Gdynia, Kraków, Łódź, Poznań, Warszawa, Wrocław), the average home price was multiplied by the average home size in square metres and the number of housing units sold (based on REAS data). On the basis of ZBP data it was assumed that the value of newly granted loans for the purchase of housing in the primary markets of 7M in 212 accounted for 5 of the value of housing loans in those cities, whereas at the end of 213 this share accounted for 57%. The estimated value of cash transactions was calaculated as the difference between transactions in 7M and disbursements of loans requiring buyer s own contribution (down-payment). Price and surface area data for all periods were updated. Source: NBP, REAS, ZBP, GUS. 14

17 I 24 I 25 I = 1 Figure 27 GD loans for housing real estate and indicator of loans recognised as non-performing loans % 8% 3 7% 25 6% 2 5% 15 4% 3% 1 2% 5 1% Figure 28 Estimated ROE on residential mortgage loans denominated in PLN for banks in Poland 8% 6% 4% 2% -2% -4% -6% -8% 2 15% 1 5% -5% -1-15% -2 Kredyty housing hipoteczne mortgage mieszkaniowe loans (LH) (L. oś) Wskaźnik impaired housing kredytów loan zagrożonych rate (RH) na nier. mieszk. (P oś) Wskaźnik impaired PLN kredytów housing zagrożonych loan rate na (RH) nier. mieszk. złotowych (P oś) Wskaźnik impaired FX kredytów housing zagrożonych loan rate (RH) na nier. mieszk. walutowych (P oś) Note: receivables (loans) with determined loss of value receivables from portfolio B, in relation to which objective premises of loss in value were identified and a decrease in the expected value of future cash flows (in banks using the IFRS) or which were recognized as non-performing receivables in accordance with the Ordinance of the Minister of Finance on establishing provisions against the risk associated with banking activities (in banks using the PAS). loan Obciążenie write-offs kredytów odpisami effective Efektywny cost koszt of loan finansowania funding kredytów effective Efektywne interest oprocentowanie rate on loans kredytów adjusted Skorygowana interest margin marża on odsetkowa loans na kredytach ROE (RH) (P oś) Note: Income and costs related to the mortgage loan portfolio are provided excluding costs of conducting bank s activity and taxes. Estimated ROE is calculated as the adjusted interest margin on mortgage loans with respect to the minimum required downpayment (buyer s own contribution). Calculation based on KNF publication, Solvency ratio - until 214, Total capital ratio - as of 214. The adjusted interest margin is the result of all income being added and all costs being deducted. The effective cost of financing was computed based on the WIBOR rates by adding estimative costs related to bank's own financing. Source: NBP, KNF. 4. Operating profitability of housing and real estate development projects, costs of construction and assembly output and economic situation of real estate developers in Poland Figure 29 Rescaled exchange indices: WIG2 and for real estate developers and construction companies (27 Q2=1) WIG2 WIG-NIER. WIG-BUD. Note: harmonized data, 27 Q2 = 1. The WIG index for real estate developers has been recorded since 27 Q2; 217 Q1 as at 2 February 217. Source: Warsaw Stock Exchange. Figure 3 Number of bankruptcies in particular sectors (as at the end of September) Note: breakdown according to the first entry into the KRS. Source: Coface Poland. Note do Figureu 3: as of 1 January 216, the former provisions in the bankruptcy law were amended - the new restructuring law entered into force. The main goal of the restructuring proceedings, in addition to satisfying creditors, is to avoid debtor s bankruptcy by allowing debtor s restructuring through entering into an arrangement with creditors, in the event of the recovery proceedings - also by carrying out recovery measures, while safeguarding the legitimate rights of creditors. A significant change is also the fact that according to the current law, the restructuring proceedings concern both insolvent companies and those threatened with insolvency, accordingly, the statistics show not only the number of bankrupts, but also companies at risk of bankruptcy. Previously, the applicable law allowed to declare arrangement bankruptcy only if the company was actually insolvent I-IX 215 I-IX 216 I-IX 217 Bodownictwo new housing real Obsługa estate rynku activities nieruchomości other Pozostałe sectors 15

18 Figure 31 Estimated share of direct construction costs per square metre of the residential building s usable area (type ) in the transaction price in the PM) 75% 7 65% 6 55% 5 45% 4 35% 3 Gdańsk Łodź Wrocław ziemia land, avg. śr.7m waż.bud.(p.oś) weighted by new housing (RH) Kraków Poznań Warszawa 25% 2 15% 1 5% Figure 32 Estimated rate of return from investment projects (type / ) in the largest cities and the reported rate of return for DFD* Note to Figure 32: the estimated rate of return on equity from typical new investment projects assuming the currently applicable interest rates, banks requirements and production costs; calculated on the basis of the diagram included in Annex 3 of the Report on the situation of the Polish market of residential and commercial real estate in 211. Since 214, NBP s own appraisal of land for multi-family housing construction has been used, which has changed the previous estimates. */DFD ROE of an average large real estate development company according to GUS data (employment size =>5 persons). Source: NBP based on Sekocenbud. Source: NBP based on Sekocenbud, GUS (F1). 45% 4 35% 3 25% 2 15% 1 5% Gdańsk Kraków Łodź Poznań Wrocław Warszawa DFD 6M, waż.bud. weighted by new housing Figure 33 Predicted changes in prices of construction and assembly works (+3M) and growth in construction costs of usable area of a residential building (type / ) Przewidywane expected changes zmiany of prices cen of construction robót bud.-montaż. costs (+3M) wg ankiety GUS Dynamika dynamic of real kw/kw construction faktycznych costs kosztów budowy wg Sekocenbud Source: NBP based on GUS data (business conditions survey), Sekocenbud. Figure 34 Average cost of construction of square metre of the residential building s usable area (type / ) in selected markets (PLN/sq. m) Warszawa 6M 1M Polska Source: NBP based on Sekocenbud. 26 Type building monitored by NBP as of 216 2H based on Sekocenbud data: an average residential multi-family building, five-storey, with an underground garage; construction technology: continuous footing, construction walls and ceilings reinforced concrete, monolithic, masonry curtain walls made from ceramic hollow brick units (MAX); change in the type of the building analysed is associated with closing of cost estimation for facility Analytical assumptions related to building 1121 have been maintained. 16

19 Figure 35 Warsaw estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer Figure 36 Kraków estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer ziemia land + + development zagosp.terenu projekt design koszty construction budowycosts koszt loan kredytu cost koszty overheads ogólne zysk developers deweloperski profit Source: NBP na podstawie Sekocenbud, REAS. Figure 37 Gdańsk estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer ziemia land + + development zagosp.terenu projekt design koszty construction budowy costs koszt loan cost kredytu koszty overheads ogólne zysk developers deweloperski profit Source: NBP na podstawie Sekocenbud, REAS. Figure 38 Poznań estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer ziemia land + + development zagosp.terenu projekt design koszty construction budowycosts koszt loan cost kredytu koszty overheads ogólne zysk developers deweloperski profit Source: NBP based on Sekocenbud, REAS. Figure 39 Wrocław estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer ziemia land + + development zagosp.terenu projekt design koszty construction budowy costs koszt loan cost kredytu koszty overheads ogólne zysk developers deweloperski profit Source: NBP based on Sekocenbud, REAS. Figure 4 Łódź estimated structure of price per square metre of housing usable area in the PM (building type / ) for consumer ziemia land + + development zagosp.terenu projekt design koszty construction budowy costs koszt loan cost kredytu koszty overheads ogólne zysk developers deweloperski profit Source: NBP based on Sekocenbud, REAS. ziemia land + + development zagosp.terenu projekt design koszty construction budowycosts koszt loan kredytu cost koszty overheads ogólne zysk developers deweloperski profit Source: NBP based on Sekocenbud, REAS. 17

20 II I 25 tys. zł % I 25 I 25 mln zł mln zł lata Figure 41 Economic indicators of an average DFD (in mln PLN) Figure 42 Situation of an average DFD (left-hand scale in mln PLN, right-hand scale in years) przychody income total koszty costs ogółem net wynik profit/loss netto bank land bank ziemi projekty projects in w progress toku housing mieszkania units land bank bank ziemi in production w latach prod. years (P(RH) oś) Note to Figures 41-44: DFD a large developer employs over 5 persons according to GUS. More recent data not available. Source: NBP based on GUS (F1). Source: NBP based on GUS (F1). Figure 43 Costs of average DFD (in thousand PLN) Figure 44 Structure of liabilities of larger developers use zużycie of materials materiałów and energy i energii wages wynagrodzenia index wsk.poz.kosztów of cost level (RH) (P oś) Source: NBP based on GUS (F1). outsourcing usługi obce other inne Figure 45 Loans to corporations for real estate purchases (in PLN billion, left-hand scale) and the share of loans recognised as non-performing loans (in %, right-hand scale) % 4 35% 3 25% 2 15% 1 5% equity kapitał capital własny kredyty loans debt dłużne securities pap. wart. pre-payments przedpłaty other inne liabilities zobow. Source: NBP based on GUS (F1). Figure 46 Value of investment transactions (EUR billion) Kredyty office space na powierzchnię loans biurową Kredyty housing na loans nieruchomości mieszkaniowe Kredyty other real na property nieruchomości loans pozostałe Wskaźnik impaired housing kredytów loan zagrożonych ratio na nieruchomości mieszkaniowe Wskaźnik impaired office kredytów space zagrożonych loan ratio na powierzchnię biurową Wskaźnik impaired other kredytów real property zagrożonych loan na ratio pozostałe nieruchomości Note: data exclusive of BGK. Source: Comparables.pl. office Biura retail Handlowe warehouse Magazyny Pozostałe others 18