Poles With Record Low Rates Spark Housing Turnaround: Mortgages

Since 2008, as Aleksander Suslowski struggled to find a good job, he and his family and two dogs had to live with his mother-in-law in her cramped two-bedroom flat in central Warsaw.

In October, Suslowski’s five-year squeeze finally ended -- a sign that Poland’s housing market has found its footing. Four months ago, he landed a permanent job as a registered nurse at a hospital. About two months later he signed a contract for a two-story home 46 kilometers (28.6 miles) southwest of Warsaw for his family of four.

“A few years ago, we’d have never thought about our own house,” Suslowski, 31, said. “And now we went to a bank and they said, ‘Fine, we’ll give you a loan.’ ”

Suslowski is among the many recent home buyers in Poland drawn to the market by record-low interest rates and prices well below their 2008 peak. The government’s new housing program, which begins next year, will give Poles further incentive to purchase a dwelling as the economy improves.

“The positive economic environment will be a driver of the market growth next year as it may boost consumers’ optimism and their willingness to buy apartments or houses,” Wojciech Werochowski, head of retail client financing at PKO Bank Polski SA, said.

Poland, whose economy has been propped up by European Union aid funds and robust consumer spending after the government cut taxes, was the only EU member to avoid a recession following the global financial crisis in 2008.

Faster Growth

Economic growth will quicken to 2.5 percent next year in Poland, a country of 39 million people and the EU’s largest former communist nation, according to government forecasts. The economy will expand 1.5 percent in 2013 after a 1.9 percent increase in 2012.

New home loans are one of the signs of Poland’s housing rebound. They rose in 2013 to 9.53 billion zloty ($3.13 billion) in the third quarter from 8.02 billion zloty in the first period. The 26.7 billion zloty of mortgages in the first nine months of 2013 represents a 12 percent drop from the same period a year ago, echoing the economic slowdown.

For the year, the total value of new home loans will be about 60 percent of the record 57 billion zloty set in 2008 and will continue to catch up, industry analysts said. PKO Bank Polski, the largest lender in the country, forecasts that home loans will increase by 5 percent to 7 percent next year as the state’s home-buyer assistance program gains momentum.

Falling Rates

The National Bank of Poland slashed interest rates by 2.25 percentage points since November 2012 to 2.5 percent, helping lure home buyers to the market. The Polish central bank said borrowing costs will stay at an all-time low until at least the middle of next year.

The average rate on new home loans dropped to a record 5.1 percent in October from 8.8 percent in 2008, according to the central bank.

Polish apartment prices are finally rising, suggesting a growth in demand, according to a Nov. 27 report by Warsaw-based researcher Centrum Amron. Average Warsaw apartment prices rose by 1.2 percent per square meter in the third quarter from the second, the first such gain in two years.

Still, the average price is 17 percent lower than the record-high 8,774 zloty per square meter in the first quarter of 2008, according to data compiled by Amron.

Along with a steady increase in wages, Poles are now able to buy 0.7 square meter for one month’s salary. That compares with 0.4 square meter before the global credit crunch, according to data on the Warsaw-based central bank’s website.

Aid Program

The state began supporting home buyers in 2007 with a program that ended last year. More than 190,000 Poles, or a fifth of new home borrowers, benefited from the assistance that helped pay part of the loan’s interest, according to the Polish Banking Association. The government stopped the aid after the financial crisis eroded state finances.

Under the new program, which is designed for first-time home buyers under 35 years old, the government will help finance from 10 percent to 20 percent of a property’s purchase price. Buyers will not have to repay the government aid as long as they keep their home for at least five years. The state plans to spend a total of 3.6 billion zloty on the program through 2018 and set aside 600 million zloty for 2014 alone.

The program may help add as much as 6 billion zloty in new home loans, according to Bloomberg calculations.

Boosting Sales

“There’s no doubt the government initiative will have an important impact on the housing market in 2014,” Malgorzata Ostrowska, a board member at homebuilder J.W. Construction Holding SA, said by e-mail.

The government support will benefit younger Poles who have had trouble getting into the property market.

“Without state aid many younger people couldn’t afford to buy their first home,” Oscar Kazanelson, the chairman of the supervisory board and a shareholder of Warsaw-based real estate developer Robyg SA, said in an e-mail. “We estimate the new program has a chance to boost new apartment sales by as much as 10 percent.”

Wojciech Kwasniak, who oversees banks at Komisja Nadzoru Finansowego, Poland’s financial markets regulator, is more pessimistic. He said there may not be enough people who need a home loan to make the new program successful.

“I’d expect weak demand may be a major problem now,” he said.

House Search

Suslowski found his home after looking for nine months for a place that would include a garden for his children and proximity to his work. He agreed to pay 330,000 zloty for the house, taking a 290,000 zloty mortgage.

He made sure not to take on too much debt, a trend that helped pop the region’s real-estate bubble in 2008. His mortgage payments will eat up only a fifth of his take-home wages.

“The loan is a must because there’s no chance to buy even a dilapidated house without credit,” Suslowski said. “The most important thing for us was not to be over-leveraged.”

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