Information on home prices and the situation in housing and commercial real estate market in Poland in 2016 Q2

Transkrypt

1 September 216 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Jacek Łaszek Hanna Augustyniak Krzysztof Olszewski Joanna Waszczuk Financial Stability Department

2 The information was prepared in the Financial Stability Department for the needs of the NBP governing bodies. The opinions expressed in this publication are authors opinions and they do not present the position of the governing bodies of Narodowy Bank Polski.

3 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Analysis of the situation in the real estate market in Poland in 216 Q2 1 leads to the following conclusions: The housing market continued to post increased activity, demonstrated by the high level of demand and the corresponding high supply. This activity did not generate excessive tensions in the real estate sector or in the financial sector; housing prices remained stable and transactions were largely financed by buyers own funds. Despite the observed recovery, offer and transaction prices per square meter of housing in the primary markets of the analysed cities showed stabilisation. The secondary market in Warsaw was the only market to post price decline, associated with the increased sales of housing at a lower price per square meter, i.e. poorer quality or location dwellings. In all groups of the analysed cities (Warszawa, 6C, 1C) prices in the primary market were higher than in the secondary market. Hedonic prices 2 in the secondary market of 16 large (voivodship) cities were stable, which confirms that the housing market is balanced. Average rents per square meter of housing (offer and transaction rents) in 7C, weighted by the share of the stock, posted a slight growth for another consecutive quarter. The indicator of the estimated availability of housing in large cities remained stable, as a result of stable nominal income of households and stable prices per square meter of housing. The average indicator for 7C was.87 square meter of housing per average monthly wage in the corporate sector, posting a rise of.38 square meter as compared to the 27 Q3 minimum. The indicator of the estimated availability of residential mortgage loans for an average household 3 in 7C decreased somewhat as a result of a slight hike in interest rate on newly granted PLN residential mortgage loans and stabilisation of average wages. Housing investment (excluding transaction costs) continues to be profitable in short-term. Considering the average achievable rent level, return on housing investment stands higher than returns on bank deposits, yields on 1-year Treasury bonds and is close to the profit earned on investment in 1 The analysis performed in this issue of the Information is based on data available up to 216 Q2. Due to delays in the access to data, some figures contain information up to 216 Q1, inclusive. Data series with average levels of prices per square meter of housing, commercial rent or transaction prices per square meter of commercial space reflect information resources available at a given moment and may be subject to revision to factor in the incoming new data. Those series are supplemented on a permanent basis in order to reflect the full set of information available at a given moment. Data revisions cleaning data from errors also bring changes in historical data. Such approach is used by other central banks and statistical offices. 2 The hedonic housing price index contains the adjustment factoring in the differences in attributes of housing (e.g. location, usable area, finishing standard) sold in individual periods. The hedonic index should respond to the increase in the share of smaller housing offered at higher price per square meter less strongly than that of the average price index or the median price index. The 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 determining hedonic price indices as a method to control quality changes of goods], Wiadomości Statystyczne no A maximum available residential mortgage loan is a measure defining the amount of the average monthly wage in the enterprise sector in a given market, considering bank lending requirements and loan parameters (i.e. NBP interest rate, depreciation period (25 years), minimum income after the repayment of loan instalments). This estimate does not take into account changes in banks lending policy, including the criteria of credit granting and terms and conditions of a loan. 1 Narodowy Bank Polski

4 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 the commercial real estate market. The housing loan servicing costs to rent ratio continues to allow financing the cost of credit with income from rent. Banks lending measured by the value of new loans denominated in PLN, excluding re-negotiated agreements, increased. In 216 Q2 new loans with the value of PLN 11.6 billion were granted, posting a a 19.7% growth against the previous quarter and a 9.6% growth in relation to 215 Q2 4. High disbursements of loans in 216 Q2 were partly associated with increased housing demand caused by the exhaustion of funds to be distributed under the government housing scheme "Housing for the young (funds of 217). In the analysed period banks increased their margins and tightened their requirements concerning collaterals and buyers own contribution, whereas in 216 Q3 senior loan officers envisage a significant tightening of bank lending policy in the residential mortgage lending segment. As a consequence, they expect a significant decline in demand for these loans 5. The quality of housing loans denominated in PLN is high, with the share of non-performing loans at the end of 216 Q2 standing at approx. 2.6%. Since 212 the share of loans denominated in foreign currency in the currency structure of bank housing loans has been on a gradual decline, which supports the financial and macro-economic stability. Declining share of residential mortgage loans in foreign currency results both from the fact that banks have ceased to grant such loans to persons who are not in the receipt of a regular income in a particular currency, as well as from regular amortization, early repayments and refinancing. The quality of foreign currency housing loans is still high, the share of non-performing loans at the end of 216 Q2 continues at a level of approx. 3.3%. Profitability of housing investment continued at a high level. This was associated with the ratio of home prices to costs of building materials and construction works, which for a several years has been favourable for real estate developers as well as with the aggregate land stock for the construction of new housing projects. Financial data of real estate developers usually show low profitability of their business, which is, however, not confirmed by the analysis conducted for an average investment project, indicating a sound level of estimated profitability of home construction projects undertaken by developers. The results of the estimates are confirmed by a large number of successive new investment projects launched and placed on the market. The number of bankruptcies in the real estate development sector has also decreased (court bankruptcy decisions or initiated restructuring proceedings 6 ). 4 Based on: 5 In accordance with the conclusions of the questionnaire addressed to chairpersons of credit committees Situation in the loan market - results of the questionnaire addressed to senior loan officers, 216 Q3, banks tightened housing loan granting criteria for the fourth consecutive quarter. Banks classified regulatory issues as the major reason for changes in the lending policy, including the entry into force of the Act of 14 April 216 on suspension of sale the Treasury Agricultural Property Stock and on the amendment of certain acts. According to banks, the tightening of the lending policy resulted in a slight decline in demand. 6 In 216 a new Restructuring Act came into force. It provides that 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, and in the event of the recovery proceedings - also by undertaking recovery measures, while safeguarding the legitimate rights of creditors. Under the current Act, the restructuring proceedings concern both insolvent companies and those threatened with insolvency. New statistics show not only the number of bankrupts, but also companies at risk of bankruptcy. Narodowy Bank Polski 2

5 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 The number of new home construction contracts and homes under construction was on the rise. The estimated high profit margins of real estate developers and high rate of return on residential construction projects as well as high demand boosted the number of issued building permits (2.5 thousand in annual terms), the number of dwellings whose construction was launched (174.4 thousand in annual terms ) as well as completed dwellings (157.6 thousand in annual terms). As compared to 215 Q2, the figure increased by 8. thousand (+16.6% y/y), by 3.5 thousand (+7.2% y/y) and by 4.4 thousand (+13.8% y/y), respectively. The stock of unsold housing in Poland s six largest cities decreased in the analysed period by approx. 2.7 thousand dwellings, amounting to 51. thousand. This was caused by a growth in supply exceeding high demand, which was partly associated with low interest rates, and the announced discontinuance of this year s disbursement of subsidies under the MDM housing scheme. In the analysed period, home selling time in the primary market 7 in 6 largest cities was stable. Real estate developers continue to manage to appropriately match the structure of home size with housing demand where the supply results from the housing stock structure. As in the segment of the most popular real estate, price is the main home choice criterion, compact housing i.e. two-room, smaller size apartments enjoy the highest popularity. The primary market continues to see a large number of both buyers purchasing a dwelling at an early stage of construction, and buyers looking for a superior standard apartment (an interesting construction project, better location and quality, prestige of the investment), for which they are willing to pay a higher price. Developers sometimes decide to sell promotional dwellings at lower prices or with a flexible schedule of payments. However, buyers in many cases decide to purchase housing in the secondary market for the sake of comfort of fast relocation and security of the transaction. Until 5 July 216, the value of applications filed under the MDM housing scheme amounted to 5% of the amount planned for next year. As a result, BGK, in accordance with the rules of the MDM housing scheme, ceased, on 6 July 216, to accept applications from buyers of dwellings whose date of fund disbursement was scheduled for Considerable disbursements should be attributed to both last year's amendment of the Act extending the housing scheme to include secondary market housing 9, as well as the announcement that the scheme will be discontinued after Previously, the applicable law allowed to declare bankruptcy under composition or arrangement scheme only if the company was actually insolvent. In the first half of 216, a small number of bankruptcies in the construction sector was declared which, however, does not indicate a good standing of the industry. The successive wave of bankruptcies is expected to occur in Q4 since the risk of bankruptcy has not disappeared. A several percent decline in the value of the construction works market continues. Companies which were not prepared to halt their investment for three quarters went bankrupt. Those construction companies which got orders to perform works below costs in order to raise current financing face problems. This plan did not succeed since it requires permanent inflow of consecutive orders which would finance past costs and losses from current proceeds. 7 Home selling time in the primary market, calculated by REAS, is the ratio of the number of apartments being on offer at the end of the quarter to the average sales recorded in the preceding year. 8 On 5 June 216 the subsidy fund providing additional financing to buyers own contribution for the purchase of their first dwelling (MDM Scheme) reached 5% of the amount planned for disbursement i.e. PLN 746 million (as stipulated in the Budget Act for 217). BGK will resume accepting subsidy applications as late as January 217 in order to distribute the remaining PLN 381 million. For the last year of the operation of the programme (218), the limit is PLN 762 million and the percentage of the funds used at the end of August 216 was insignificant (3.5%). 9 On 1 September 215 the Act of 25 June 215 entered into force on the amendment of the Act on government s support to firsttime home buyers (Journal of Laws of 17 August 215, item 1194). The amendment covered dwellings from the secondary 3 Narodowy Bank Polski

6 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q In 216 Q2, the maximum price limits per one square meter of housing eligible for the MDM housing scheme in the cities under discussion decreased in 8 markets, increased in 6 and remained unchanged in 2 cities. In 216 Q3, Gdańsk was the only voivodship capital to record slight increase in price limits. As the funds available for subsidies in 216 have been exhausted, this should not affect the housing market. Subsidies to interest on first loans granted under the Family on their own (RNS) housing scheme are gradually coming to an end yet, thanks to historically low interest rates, this should not pose a major problem to the servicing of those loans. Until the end of 216 Q2, under the Rental Housing Fund (FMW) over 28 dwellings were contracted, including over 4 were already leased, almost 233 are under construction and over 36 with the investment decision being finalized. Currently, the FMW offers housing in Warszawa, Poznań, Piaseczno, Gdańsk and Kraków 11. As announced by BGK under the existing scheme supporting the construction of social housing for rent 12 in 217 approx. 3 thousand dwellings are expected to be constructed, with their highest number in the West Pomeranian Voivodship (Województwo Zachodniopomorskie), Silesian Voivodship (Województwo Śląskie) and Mazovian Voivodship (Województwo Mazowieckie). Since February 216, the Borrowers Support Fund has been operating 13, offering refundable assistance on prefmarket. It also increased the amount of subsidies for families or single parent families (2% for families with two children and up to 3% for families with three or more children). Moreover, the age limit was abandoned for parents and single-parent families bringing up three or more children willing to participate in the programme (the previously prescribed age limit 35 years). The loan granting terms were also eased - any person, instead of only close family, may act as an additional borrower, which is important for obtaining creditworthiness. 1 In January 216, Kazimierz Smoliński, Deputy Minister at the Ministry of Infrastructure and Construction announced that the government did not plan to continue the MDM Housing Scheme and the Scheme would be discontinued in accordance with the provisions of the Act, namely on 3 September In 217 subsequent investment projects are supposed to be launched in Warszawa and Katowice, and in in Poznań and Łódź. By the end of 22, the FMW should have offered approx. 2 thousand dwellings for rent. 12 The provisions of the Act (Journal of Laws of 1 September 215, item 1582) enable the BGK to grant loans to social housing societies TBS, municipal companies and housing cooperatives, which, under current conditions, would bear interest at the rate of approx. 1.7%, increased by a 1.3 percentage point margin to be financed by the state budget. The scheme is spread over 1 years during which the BGK should lend PLN 4.5 billion for the construction of social housing for rent (the construction of approximately 3 thousand dwellings is assumed). In 216, the BGK shall allocate PLN 45 million to lending. It is envisaged that the first loan agreements will be concluded around June 216. In accordance with the provisions of the Act, it will not be possible to repurchase dwellings built for the preferential loan. There are restrictions in access to home rental depending on tenants income. The Act provides for income verification every two years. The rent rate may not exceed 5% of the replacement value of the dwelling. 13 In accordance with the Act (Journal of Laws of 9 October 215 item 1925) on 19 February 216 the Borrowers Support Fund (FWK) started granting refundable assistance, on preferential terms, to borrowers facing difficult situation. Those borrowers are eligible for assistance who, on the day of submitting a subsidy application, have an unemployed status or face a situation when a monthly mortgage instalment exceeds 6 per cent of monthly income earned by the borrower s household. The interestfree, but refundable assistance in the amount of up to PLN 1.5 thousand will apply for a maximum period of 18 months. It is possible to apply for the support in bank branches which granted housing loans. Reimbursement starts two years after assistance was granted and may take 8 years. Decisions concerning granting assistance to borrowers are taken by the BGK. Persons being owners of another house or dwelling are not eligible for this form of assistance. Money from the Fund is not transferred directly to the borrower, the instalments are settled by the Fund directly to the credit account of the bank-creditor. The Fund holds the available amount of PLN 6 million. This amount originates from contributions of crediting banks, on a pro rata basis, in relation to the size of the portfolio of housing loans for households, whose delay in repayment of the capital or the interest exceeds 9 days. If necessary, the Rental Housing Fund (FWM) will be supplied with further funds, e.g. if its amount falls below PLN 1 million, the funds replenishment will amount to PLN 3 million. Narodowy Bank Polski 4

7 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 erential terms to borrowers facing temporary problems with loan repayment. According to the information provided by BGK, approx. 38 agreements for the total amount of approx. PLN 8.5 million have been concluded under this scheme so far. The value of real estate investment transactions in the commercial real estate market in Poland in the first half of 216 reached approx. EUR 2 billion, including EUR 1 billion invested in commercial space, approx. EUR 8 million - in office space and EUR 25 million - in warehouses. The rates of return in the Warsaw office market remain at a very low level of approx. 5.5% 14. This confirms high prices in relation to low rents. Investors compare the return on investment in office real estate with the historically low yields on government bonds in Poland and take into account very low levels of financing abroad. In the Warsaw office space rental market, which is the dominant market, the vacancy rate increased to approx. 15.4% 15, nevertheless developers continue construction of new buildings. The completion and handover of further office buildings may increase the vacancy rate in the near future. The warehouse market is developing strongly mainly due to the demand from logistics and trade companies. The supply of storage space in the first half of 216 increased by 6 thousand square meters, amounting to approx. 1.5 million square meters, whereas the average vacancy rate fell to 6.1% 16. Transactions rents for A class office space in Warsaw stood at around 23 EUR per square meter per month, remaining stable also in other markets. Transaction prices for the purchase of retail and service premises in the secondary market in Poland remained broadly unchanged. 14 See CBRE report Poland Investment, H See report by Cushman & Wakefield Property Times Warsaw. Offices, 1st half of See JLL report Rynek powierzchni magazynowych w Polsce w I połowie 216 r. [Market of warehouse space in Poland in the 1st half of 216] 5 Narodowy Bank Polski

8 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 The figures below describe the most important developments in the housing market in Poland s major cities in 216 Q1. Charts and figures present: 1) home prices (Figures 1 14), 2) housing availability, loan availability, availability of loan-financed housing, 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 45), 5) housing construction and the residential market in Poland (Figures 46 59), 6) housing policy (Figures 6-71). 7) commercial real estate (Figures 72-75). The analysis of housing prices, offer prices, transaction prices and hedonic prices 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) 17. 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 analyses and reports of REAS, the Polish Financial Supervision Authority and the aggregate credit data from the Credit Information Bureau were also used. For the structural market analysis, data published by the Central Statistical Office and many studies containing sector data were used. 17 The survey of residential and commercial real estate prices in Poland s selected cities for 216 was published in the Decree of the Council of Ministers of 27 August 214 on the Programme for Surveys in Public Statistics for 215 (Journal of 214 item 133), symbol (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 215 were announced in the Decree of the Prime Minister of 18 March 215 on reporting forms, completion instructions and statistical questionnaires and questionnaire forms used in surveys of public statistics for 215 (Journal of Laws of 215 item 561). Since the survey is carried out by NBP, the Bank publishes the surveys on its website. In listings related to 216 Q2, approx thousand records were collected, including approx. 26.5% of records concerning transactions and 76.3% of records concerning offers. Altogether approx. 2. million records were collected in the base, including 2.8% of records concerning transactions and 79.2% of records concerning offers. Narodowy Bank Polski 6

9 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 List of abbreviations 5C 6C 7C 1C BaNK BaRN BIK CPI LD GD GUS IRR EURIBOR FMW KNF KRS LIBOR LTV MDM IFRS NBP PONT REAS RNS PM PAS SM ROE WIBOR WIG2 ZBP ZKPK 5 cities: Gdańsk, Kraków, Łódź, Poznań, Wrocław 6 cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań, Wrocław 7 cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań, Warszawa, Wrocław 1 cities: Białystok, Bydgoszcz, Katowice, Kielce, Lublin, Olsztyn, Opole, Rzeszów, Szczecin, Zielona Góra Commercial Real Estate Database Real Estate 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 Financial Supervision Authority National Court Register London Interbank Offered Rate Loan-to-Value ratio Government-subsidised housing scheme Mieszkanie dla Młodych [Housing for the Young] International Financial Reporting Standards Narodowy Bank Polski 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) Return on Equity Warsaw Interbank Offered Rate Index including top 2 companies listed on the Warsaw Stock Exchange with the highest value of publicly traded shares The Polish Bank Association Accumulated index of changes in banks credit policy criteria 7 Narodowy Bank Polski

10 III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 1. Transaction, hedonic and offer prices of housing in the primary market (PM) and in the secondary market (SM) Figure 1 Transaction prices per square meter of housing PM Figure 2 Transaction prices per square meter of housing SM Gdańsk Gdynia Kraków Łódź Poznań Wrocław Warszawa Note: the home price database of NBP (BaRN) has existed since 26 Q3; description of the database may be found in the Report on home prices and the situation in housing and commercial real estate market in Poland in 215 available on the bank s website. Figure 3 Weighted average price per square meter of housing, offers and transactions - PM Gdańsk Gdynia Kraków Łódź Poznań Wrocław Warszawa Figure 4 Weighted average price per square meter of housing, offers and transactions - SM Warszawa RPT 6M RPT 1M RPT Warszawa RPO 6M RPO 1M RPO Warszawa RWT 6M RWT 1M RWT Warszawa RWO 6M RWO 1M RWO Warszawa hed. 5M hed. 1M hed. Note to Figures 3 13: the price weighted with the share of housing in the market stock, the average price for Warszawa; 6C are the following cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań, Wrocław; 1C are the following cities: Białystok, Bydgoszcz, Katowice, Kielce, Lublin, Olsztyn, Opole, Rzeszów, Szczecin, Zielona Góra. Narodowy Bank Polski 8

11 III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 5 Ratio of the average weighted transaction price per square meter of housing PM to SM 1,25 1,2 1,15 1,1 1,5 1,,95,9,85,8 Figure 6 Ratio of the average weighted transaction price to offer price per square meter of housing SM 1,3 1,25 1,2 1,15 1,1 1,5 Warszawa 6M 1M Figure 7 Weighted average and real price per square meter of housing in the primary market to CPI-deflated price (26 Q3 = 1) Warszawa 6M 1M Figure 8 Weighted average and real price per square meter of housing in the secondary market to CPI-deflated price (26 Q3 = 1) Warszawa RP T 6M RP T 1M RP T Source: NBP, AMRON, GUS. Warszawa RP T defl. CPI 6M RP T defl. CPI. 1M RP T defl. CPI Figure 9 Weighted average transaction price per square meter of housing - SM and price adjusted by the hedonic price index Warszawa RW T 6M RW T 1M RW T Source: NBP, AMRON, GUS. Warszawa RW T defl. CPI 6M RW T defl. CPI. 1M RW T defl. CPI Figure 1 Weighted average transaction price per square meter of housing in SM, adjusted by the hedonic price index, in the largest cities Warszawa hed. 6M hed. 1M hed. Warszawa RW 6M RW 1M RW Gdańsk hed. Kraków hed. Łódź hed. Poznań hed. Warszawa hed. Wrocław hed. 9 Narodowy Bank Polski

12 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 11 Average offer prices per square meter of housing in PM in 7 cities Figure 12 Average offer prices per square meter of housing in PM, selected markets Gdańsk Gdynia Łódź Kraków Poznań Warszawa Wrocław Note to Figures 11-12: prices are collected from all available sources. Source: PONT Info Nieruchomości Warszawa 5M 1M Source: PONT Info Nieruchomości Figure 13 Average offer prices per square meter of housing, new launched housing contracts PM, selected markets Łódź Kraków Poznań Trójmiasto Wrocław Warszawa śr.6m Note: prices refer only to new contracts put on the market for the first time. Source: Real Estate Advisory System (REAS). Figure 14 Average rent rates (offers and transactions) per square meter of housing in 7 cities Gdańsk Gdynia Kraków Łódź Poznań Warszawa Wrocław 7M śr.waż.zasobem Narodowy Bank Polski 1

13 III 26 II II II II II II II II II I 25 III 25 I 26 III 26 II II II II II II II II II III 26 II II II II II II II II II III 26 II II II II II II II II II zmiana w % tys zł. Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 2. Housing availability, loan availability, availability of loan-financed housing, profitability of housing investment Figure 15 Estimates of available mortgage loans and accumulated index of changes in banks lending policy criteria (ZKPK) , 1,, -1, -2, -3, -4, -5, -6, -7, -8, -9, Figure 16 Quarterly change of availability of loan-financed housing per square meter for 7C, strength and direction of the impact of individual components 15% 1% 5% % -5% -1% -15% -2% -25% Gdańsk Kraków Łódź Poznań Warszawa Wrocław śr.waż.bud. ZKPK (p.oś) Available housing loan a measure specifying the potential maximum housing loan; expressed in PLN thousand taking into account banks lending requirements and loan parameters (interest rate, amortization period, minimum wage, as the minimum income after payment of loan instalments). Availability of loan-financed housing a measure specifying how many square meters of housing may be purchased with a mortgage loan obtained basing on the average monthly wage in the enterprises sector in a particular market (GUS), in view of bank s lending requirements and loan parameters (interest rate, depreciation period, social minimum wage understood as the minimum income after payment of loan instalments) at an average transaction price of housing (4% in the primary market and 6% in the secondary market) 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 of the index are described in the Financial Stability Report, December 212, NBP. Source: NBP, GUS. Source: NBP, GUS. Figure 17 Estimated housing availability in terms of square meter of housing for an average wage in the enterprise sector 1,1 1,,9,8,7,6,5,4,3 cena (śr.rp i RW) wynagrodzenia maks.udział dochodu przezn.na spłatę stopa procentowa kredytowa dostępność mieszkania Figure 18 Costs of a housing loan for consumer as deflated with CPI or wage growth in the enterprise sector 8% 6% 4% 2% % -2% -4% -6% -8% Gdańsk Gdynia Kraków Łódź Poznań Warszawa Wrocław śr. 7M Housing availability a measure of potential availability to purchase housing space at the transaction price for an average wage in a particular city. It expresses the number of square meters of housing that can be purchased for an average wage in the enterprise sector in a particular city (GUS), at an average transaction price in a particular market (4% in the PM and 6% in the SM) (NBP). Source: NBP, GUS. nom.st.proc.kred.mieszk.pln real.st.proc.kred.mieszk.pln def. CPI real.st.proc.kred.mieszk.pln dla kred.rns / MDM def.cpi real.st.proc.kred.mieszk.pln dla kred.rns / MDM def.dyn.wynagr.(wyrówn.) real.st.proc.kred.mieszk.pln def. dyn.wynagr.(wyrówn.) Note: values below denote negative real interest rate for the borrower; red lines separate the period of the absence of the government subsidised housing scheme, i.e. RNS (effective till the end of 212) and MDM (launched in 214). Source: NBP, GUS, BGK. 11 Narodowy Bank Polski

14 I 24 I 25 I 26 I 23 I 24 I 25 I 26 zmiany kwartalne w mld zł stan w mld zł III 26 II II II II II II II II II tys. mieszkań Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 19 Profitability of home rental (average in 7 cities) as compared with bank deposits and loans, 1- year Treasury bonds and rate of capitalization of commercial property (offices and retail space) 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1,,5 Figure 2 Estimate of housing demand in PM in 7C and its components najem do dep.gd najem do obl.1l. najem do kred.mieszk.gd najem do kap.nier.kom. czynniki popytu ważone, indeksowe (I 26=1) kredytowa dostępność mieszkania (I 26 =1) opłacalność najmu wzgl. inwest. gotówkowego (I 26=1) spekulacyjny zysk inwestora mieszkaniowego (I 26=1) sprzedane 6M (p. oś) Note to Figure 19: values exceeding 1 denote higher profitability of purchasing property for rental to third persons than other capital investment. This analysis does not take into account high transaction costs in the housing market and potentially long payback periods. Note to Figure 2: aggregate demand factor (profitability of rental against cash investment) consists of consumer demand - 6% (loan availability), profitability of home rental - 3% and speculative investor s profit - 1%; the weights were estimated by experts, the index presents moving average of two consecutive quarters. Source: NBP, GUS. 3. Disbursement of housing loans, interest rates Figure 21 Balance and quarter-on-quarter changes in housing loan receivables from households after adjustments and the currency structure of quarter-onquarter increases in housing loan receivables (PLN billion) Figure 22 Currency structure of housing loan receivables from households resulting from housing loans (%) walutowe złotowe 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % mieszkaniowe kredyty walutowe po korektach (zm.kw.) (L oś) mieszkaniowe kredyty złotowe (zm.kw) (L oś) stan kredytu mieszkaniowego (P oś) w tym stan kredytu walutowego (P oś) Narodowy Bank Polski 12

15 I 23 I 24 I 25 I 26 I 25 III 25 I 26 III 26 II II II II II II II II II wartość w mld zł liczba w tys. mld zł II II II II II II II IV 28 I IV 29 I IV 21 I IV 211 I IV 212 I IV 213 I IV 214 I IV 215 I Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 23 Household loans for housing real estate and indicator of loans recognised as non-performing loans 4 1% 35 9% 8% 3 7% 25 6% 2 5% 15 4% 3% 1 2% 5 1% % Figure 24 Estimated ROE on 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% Note: receivables (loans) with determined loss of value receivables from portfolio B, in relation to which objective premises of loss in value were observed and a decrease in the expected value of future cash flows (in banks using the IFRS) or which were deemed as doubtful 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). Kredyty hipoteczne mieszkaniowe (L. oś) Wskaźnik kredytów zagrożonych na nier. mieszk. (P oś) Wskaźnik kredytów zagrożonych na nier. mieszk. złotowych (P oś) Wskaźnik kredytów zagrożonych na nier. mieszk. walutowych (P oś) Figure 25 New housing loan contracts: value and number in the quarter Obciążenie kredytów odpisami Efektywny koszt finansowania kredytów Efektywne oprocentowanie kredytów Skorygowana marża odsetkowa na kredytach ROE (P oś) Note: Income and costs related to the mortgage loan portfolio. Estimated ROE is calculated as the adjusted interest margin on mortgage loans with respect to the minimum required down-payment (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. As of 216, bank tax has been included. Figure 26 Territorial structure of the value of new housing loan contracts in Poland 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % wartość PLN w tym wartość walutowe Warszawa 6M 1M PP Polska (p. oś) liczba PLN w tym liczba walutowe Note to Figures 25 and 26: the data inform about signed housing loan contracts and not the actual disbursement of housing loans. Source: ZBP. Source: BIK. 13 Narodowy Bank Polski

16 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Table 1 Estimated gross mortgage loan disbursements to households in Poland and the estimated value of cash and loan-financed purchases of developer housing in 7 largest markets (in PLN million) Date Estimated value of disbursed housing loans in Poland Estimated value of housing transactions in the PM in 7 cities Estimated value of disbursed loans with client s downpayment for home purchases in the PM in 7 cities Estimated value of cash home purchases in the PM in 7 cities Estimated share of cash home purchases in the PM in 7 cities 212 Q1 5,385 2, , Q2 7,325 2,791 1,254 1, Q3 7,661 2,512 1,312 1, Q4 7,441 2,882 1,274 1, Q1 6,295 2,597 1,121 1, Q2 7,867 2,897 1,428 1, Q3 9,14 3,457 1,69 1, Q4 9,84 3,989 1,773 2, Q1 7,571 3,998 1,478 2, Q2 8,899 3,794 1,737 2, Q3 8,894 3,811 1,736 2, Q4 8,122 4,59 1,585 2, Q1 8,996 4,29 1,756 2, Q2 1,64 4,68 2,77 2, Q3 1,341 4,957 2,19 2, Q4 11,237 5,397 2,194 3, Q1 9,742 5,48 1,92 3, Q2 11,661 5,723 2,276 3,447.6 Note: the estimates are based on the following assumptions: In the period 212 Q1-214 Q4, 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. As of 215 Q1 the value of disbursements is estimated based on data collected from banks. In order to calculate the estimated value of PM transactions in 7 C (Gdańsk, Gdynia, Kraków, Łódź, Poznań, Warszawa, Wrocław), the average home price was multiplied by the average home size in square meters 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 7 C in 212 accounted for 5% of the value of housing loans in those cities, whereas at the end of 213 this share amounted to approx. 57%. The estimated value of cash transactions was calculated as the difference between transactions in 7C and disbursements of loans requiring buyer s own contribution (down-payment). Data concerning prices for all the periods have been updated. Source: NBP, REAS, ZBP, GUS. Narodowy Bank Polski 14

17 I 24 III 24 I 25 III 25 I 26 III 26 II II II II II II II II II II I = 1 I 25 III 25 I 26 III 26 II II II II II II II II II I 25 III 25 I26 III 26 I27 II I28 II I29 II I21 II I211 II I212 II I213 II I214 II II Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 27 Interest rates on housing loans for households in Poland 9% 8% 7% 6% 5% 4% 3% 2% 1% Figure 28 Bank margins (to WIBOR, LIBOR, EURI- BOR 3M) on new housing loans 5,% 4,5% 4,% 3,5% 3,% 2,5% 2,% 1,5% 1,% PLN nowe CHF nowe EUR nowe PLN stany CHF stany Note: foreign currency loans practically ceased to be granted in 212. %PLN-WIBOR3M %CHF- LIBOR3M %EUR-EURIBOR3M %PLN-st.dep.GD nowe %PLN-st.dep.GD stany Note: bank margin is the difference between housing loan rate (NBP data) and the LIBORCHF3M rate, the EURIBOR3M rate or WIBOR3M rate. 4. Operating profitability on housing and real estate development projects, costs of construction and assembly production 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) Figure 3 Number of bankruptcies in particular sectors (as at the end of the year) I-V I-V Bodownictwo Obsługa rynku nieruchomości Pozostałe WIG2 WIG-DEW. WIG-BUD. Note: harmonized data, 27 Q2 = 1. The WIG index for real estate developers has been recorded since 27 Q2; 216 Q 3 information as at 14 September 216 Source: Warsaw Stock Exchange. Note: breakdown according to the first entry into the KRS. Source: Coface Poland. Note to Figure 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. 15 Narodowy Bank Polski

18 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 31 Estimated share of direct construction costs per square meter of the residential building s usable area (type 1122 building 18 ) in the transaction price in the PM) 75% 7% 65% 6% 55% 5% 45% 4% 35% 3% Figure 32 Rate of return on equity from investment projects in the largest cities and the reported rate of return of real estate developers (DFD*) 35% 3% 25% 2% 15% 1% 5% % Gdańsk Kraków Łodź Poznań Wrocław Warszawa 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 housing construction has been used, which has changed the previous estimates, in particular, for Poznań. DFD ROE of an average large real development company according to GUS data (employment size =>9 persons). Source: NBP based on Sekocenbud, GUS (F1). 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 building 18/ ) 6% 5% 4% 3% 2% 1% % -1% -2% -3% Gdańsk Kraków Łodź Poznań Wrocław Warszawa DFD Figure 34 Average cost of construction of square meter of the residential building s usable area (type building 18 ) in selected markets (PLN/sq.m) Przewidywane zmiany cen robót bud.-montaż. (+3M) wg ankiety GUS Dynamika kw/kw faktycznych kosztów budowy wg Sekocenbud Warszawa 6M 1M Polska 18 Type building monitored by NBP as of 216 1H 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. Narodowy Bank Polski 16

19 Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 35 Warszawa - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers Figure 36 Kraków - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. Figure 37 Gdańsk - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. Figure 38 Poznań - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. Figure 39 Wrocław - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers Figure 4 Łódź - estimated structure of price per square meter of housing usable area in the PM (type / building) for consumers ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. ziemia + zagosp.terenu projekt koszty budowy koszt kredytu koszty ogólne zysk deweloperski Source: NBP based on Sekocenbud, REAS. 17 Narodowy Bank Polski

20 II II II II II II II I I 25 III 25 I 26 III 26 II II II II II II II II II tys. zł I 25 III 25 I 26 III 26 II II II II II II II II II I 25 III 25 I 26 III 26 II II II II II II II II II mln zł mln zł lata Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 Figure 41 Economic indicators of DFDs Figure 42 Situation of an average DFD przychody koszty ogółem wynik netto bank ziemi projekty w toku mieszkania bank ziemi w latach prod. (P oś) Note to Figures 41-43: 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 the average DFD % 1% 8% 6% 4% 2% % zużycie materiałów i energii wynagrodzenia wsk.poz.kosztów (P oś) Source: NBP based on GUS (F1). usługi obce inne Figure 44 Loans to corporations for real estate purchases (in PLN billion, left-hand scale) and the share of loans classified as doubtful loans (in % right-hand scale) % 45% 4% 35% 3% 25% 2% 15% 1% 5% % Figure 45 Value of investment transactions (EUR billion) Kredyty na powierzchnię biurową Kredyty na nieruchomości mieszkaniowe Kredyty na nieruchomości pozostałe Wskaźnik kredytów zagrożonych na nieruchomości mieszkaniowe Wskaźnik kredytów zagrożonych na powierzchnię biurową Wskaźnik kredytów zagrożonych na pozostałe nieruchomości Note: Data exclusive of BGK. Biura Handlowe Magazyny Pozostałe Source: Comparables.pl. Narodowy Bank Polski 18

21 IV 25 IV 26 IV 27 IV 28 IV 29 IV 21 IV 211 IV 212 IV 213 IV 214 IV 215 II II II II II II II II II I 25 III 25 I 26 III 26 II II II II II II II II II I 25 III 25 I 26 III 26 II II II II II II II II II mieszkania w kwartale mieszkania w kwartale I 25 III 25 I 26 III 26 II II II II II II II II II mieszkania mieszkania w kwartale Information on home prices and the situation in housing and commercial real estate market in Poland in 216 Q2 5. Residential construction and housing market in Poland s selected cities Figure 46 Structure of residential construction investors in Poland in two quarters of the years Figure 47 Completed dwellings in Poland, in quarteron- quarter terms Source: GUS. oddane rozpoczęte pozwolenia przeznaczone na sprz. i wyn. indywidualne spółdzielcze pozostałe Figure 48 Dwellings under construction in Poland, in quarter-on-quarter terms 6 7 miast pozostała Polska Note to Figures 47 49: in violet colour only fourth quarters have been marked. Source: GUS. Figure 49 Issued building permits in Poland, in quarter-on-quarter terms miast pozostała Polska 7 miast pozostała Polska Source: GUS. Source: GUS. Figure 5 Housing construction in Poland (thousand dwellings) and home construction indicator in Poland (dwellings under construction minus completed dwellings) Figure 51 Number of dwellings put on the market, both sold and offered for sale in Poland s 6 largest markets* Mieszkania rozpoczęte Mieszkania oddane Pozwolenia na budowę mieszkań Wskaźnik koniunktury (p.oś) Note: rolling averages for four subsequent quarters. Source: NBP based on PABB and GUS. wprowadzone w kwartale oferta na koniec kwartału sprzedane w kwartale *Warszawa, Kraków, Tri-city agglomeration of Gdańsk, Sopot and Gdynia, Wrocław, Poznań, Łódź. Source: REAS. 19 Narodowy Bank Polski