If it wasn’t for the Safe Mortgage 2% program, the housing market could be doing really poorly. The level of credit action we observed at the end of 2022 was record low and clearly demonstrated how much the purchase of an apartment in Poland depends on the possibility of obtaining a mortgage. Hence, increasing the availability of financing – including through a subsidy system, is certainly what demand needs to materialize in the form of sales. In 2023, also thanks to BK2%, more than 54 thousand transactions materialized on the developer market alone.
Was the market waiting for new proposals? Yes! Is it a good proposal? More can certainly be said after the presentation of a detailed legislative project. So, what do we know today?
The element that raises the least doubts is the start in half a year with a budget of 500 million for this year. Again, just like with BK2%, we will be dealing with a limited pool of funds. So we know there will be a promotion and we know we need to act quickly to be included. If the government does not include price limits per square meter in the project, we will once again be fueling the fire – another strong factor driving prices will appear. The supply side may want to hold off on selling until the start, and prices will rise again.
Setting a subsidy limit, not the total purchase price, means that the value of the apartment, and thus the total amount of the loan, may be higher than in the previous program. This surplus will be interest-bearing on standard terms, which means we will be dealing with a situation as if we were taking out two loans at the same time (one in the amount of the subsidy limit and the other in the amount of the difference between the total loan amount and the subsidy amount).
For example, if a single person wants to take out a loan of 400 thousand in a bank where the standard offer is 7%, then roughly their interest (during the period of subsidies, which is to be 10 years) will be 4.25% (from half of the loan 1.5%, and from the other half 7%). Of course, this somewhat facilitates the situation for buyers in the largest cities, where the average prices per square meter of apartments last year reached tens of thousands in Warsaw alone at the end of December it was already 16,400 PLN/square meter).
However, in addition to the cost of the loan, there are still questions about the availability of the loan due to the way creditworthiness is calculated – something that was the main blocker in 2022 when taking out traditional loans – especially when we will be dealing with a loan significantly exceeding the subsidy limit.
Additionally, a sensitive element is related to the income criterion. How will creditworthiness be calculated for people running a business and settling in the form of a lump sum (where there is no such thing as net income because costs are not documented). In the case of people on business activity, this may prompt some to generate additional costs (e.g., speeding up planned one-off expenditures) in order to catch up with the limit (according to announcements, the average of the last six months is to be calculated).
The loan (the part subject to subsidies) is to be interest rates ranging from 0% to 1.5%. However, the question is whether, as was the case with BK2%, this will be contractual (and will actually depend on the offer of a given bank) or whether every bank will have to apply exactly such interest.
Thus, the points we have (based on media reports):
- Limitation of subsidy, but theoretically this does not mean the maximum amount of the loan
- Income limit – but it does not have to apply as the principle of “a PLN for PLN” partly nullifies it.
- No information about the minimum/maximum own contribution or whether it can be combined with the Apartment without own contribution program.
- We also do not know if during the first 10 years of repayment there will be decreasing installments.
Without answers to these questions, it will be difficult to assess whether this is a better program.
The circle of potential borrowers will be larger. However, it seems that the program will be more directed to buyers of larger apartments and families with children than singles – and thus potentially buyers of the first apartments.
In the case of larger families, the cost of taking such an obligation will probably be lower than with the application of BK2% (a fairly high subsidy limit is proposed), of course, everything will depend on the total amount of the loan. In the case of singles and two borrowers, especially those taking out a loan amount within the range of 400-500 thousand or higher, the effective cost of the loan will be significantly higher than in the case of BK2%.
Unlike the Safe Mortgage 2%, where regardless of the amount (within the permissible amount) the cost of the loan during the subsidy period was relatively constant and oscillated around 2% or slightly exceeded it, in the new proposal “Apt on start” the cost, hence the profitability of the solution will be very variable when we want to take out more loans than the amount of the subsidy.
Paweł Onych, Finance Director at Otodom.
