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Uncertainty Over Housing Market in 2024: New Program Could Drive or Suppress Prices

REAL ESTATEUncertainty Over Housing Market in 2024: New Program Could Drive or Suppress Prices

“If the new housing program announced by the government is rationally calibrated, there is a chance that in 2024 the increase in apartment prices will be at the level of a few percent. However, if access to these cheap loans is very wide and easy, we can expect that the price of apartments will again increase by several dozen percent,” says Bartosz Turek, Chief Analyst of HRE Investment Trust. The expert points out that this is the biggest unknown in the housing market in 2024. However, many indicators suggest a year filled with more calm and less turmoil than the last two turbulent years, partly due to the end of the previous ‘2% Safe Mortgage’ program and the recovery of the supply side.

“2024 has a good chance of finally introducing some stability to the real estate market. We will observe a reconstruction of the balance between demand and supply, the pressure on price increases will be significantly less,” says Bartosz Turek to Newseria Biznes agency.

The last two years have been an unstable period for the Polish housing market. First, in 2022, the war in Ukraine began, the Monetary Policy Council (RPP) initiated a cycle of interest rate hikes and the Polish Financial Supervision Authority (KNF) introduced regulations that drastically reduced Poles’ borrowing capacity. The effect was a sharp drop in apartment sales and a rise in demand from Poles who could not afford to buy their own homes. Last year saw a reversal of this trend with a highly dynamic revitalization. The supply of apartments for sale was melting before our eyes, and prices were rising.

“In 2023, apartment prices rose very dynamically. We do not have full data yet, just information about offer prices, and these show that in some locations apartment prices rose by over 20 percent. When we know the data about transaction prices, it will most likely turn out that this increase was slightly lower, at the level of 10-15 percent, although this is still very dynamic,” evaluates the chief analyst at HRE Investment Trust.

This increase in apartment prices was the result of disrupting the balance between demand and supply – the market offer was even two to three times too small compared to needs. However, in 2024 there is a chance that the price increase will be less spectacular, and the housing market will be more calm and stable. This is mainly because developers have already started to rebuild the offer of apartments for sale, which dropped sharply last year.

“According to Unirepo data, the number of unique apartments for sale on the secondary market in major provincial cities fell – counting from January 2023 to January 2024 – by about a third. Looking at the cheapest apartments, we had a decrease by over half,” says Bartosz Turek. “Now there is a chance that this situation will start to reverse a little. Developers have already started more new constructions in the second half of 2023, their activity measured by the number of started investments increased by half. This already resulted in a slight rebalancing of the offer of apartments for sale in October and November last year, thus reducing pressure on price increases. Unfortunately, then came December and the rush for the “2% Safe Mortgage”.

According to HRE Investment Trust’s analysis, the lack of secured financing for the government program last December caused panic among borrowers. The prospect of expiration of the most generous housing program to date caused potential buyers to rush for subsidized loans. As a result – according to BIK data – they declared the demand for housing loans with the highest value in history, over PLN 20 billion. That’s over five times more than in the same period a year earlier. For comparison, in all of 2022, the total value of mortgages granted was about PLN 45 billion.

“A lot of people decided to buy a flat at the last minute, and this again caused the erosion of the flat offer at the end of last year,” says the expert.

In the current year, 2024, the “2% Safe Mortgage” program will not be continued, but it should weaken the demand. On the other hand, the good economic situation favors housing buyers.

“We have a good situation in the labor market, i.e., low unemployment and rising wages. According to NBP forecasts, they will increase by over 9% in 2024. Even if we take inflation into account, this means a real increase in wages by 4.5%, the fastest pace since 2019. In practice, we will have more money in our wallets, which obviously stimulates demand in the housing market,” says Bartosz Turek. “On the other hand, interest rates are expected to fall this year. The basic rate is now 5.75%, but by the end of this year, it may be 4-4.5%. If this really happens, Poles’ creditworthiness could increase by several percent. This will of course translate into demand for apartments, and loan installments will be lower as well.”

According to HRE Investment Trust’s chief analyst, the biggest unknown in 2024 will be the future of housing programs. The new coalition government has already announced a program operating in the media under the name “Start-Up Home”. In 2024, PLN 500 million is to be allocated for it, from which about 50,000 preferential loans are to be granted. They will mainly benefit people with lower incomes who cannot use a standard bank mortgage. However, the income thresholds have been set so that almost all buyers will be eligible. The new preferential loan will also have a lower interest rate than its predecessor, and for now, no upper limit on the purchase price of a property bought with a cheaper loan has been indicated.

“The big unknown is how this program will be finally constructed after the entire legislative process, inter-ministerial consultations, social consultations and work in parliament. The assumptions that have been initially published suggest that access to these loans will be very easy, which would again be dangerous for the balance between demand and supply, as it could cause apartments to become much more expensive this year. But most likely these preliminary assumptions will be corrected and access to this money will not be so wide,” predicts Bartosz Turek.

In his opinion, there are several ways for the new program not to repeat the mistakes of its predecessor. They include introducing lower income limits and more support for families expanding or people with disabilities, and limits on the maximum value of the purchased property and area. In addition, the program should be long-term to limit the characteristic demand bursts of the last few years.

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