Based on the first information, it is difficult to assess whether the ‘Mieszkanie na start’ programme will be better than ‘Bezpieczny Kredyt 2%’, but it looks like the pool of potential borrowers will be larger. On the other hand, it seems that the programme will target buyers of larger flats and families with children more than singles – and therefore potentially first-time buyers, assessed Otodom’s funding director Pawel Onych. According to him, if the government does not include price per m2 limits in the draft, there will once again be a strong price-raising factor.
“If it wasn’t for the 2% Safe Credit, things could be really bad with the housing market. The level of lending we saw at the end of 2022 was at a record low and showed in all clarity how dependent the purchase of a flat in Poland is on the ability to take out a mortgage. So increasing the availability of financing – including through the subsidy system – is certainly what demand needs in order to materialise in the form of sales. In 2023. – also through BK2% materialised in the form of more than 54,000 transactions in the property development market alone,” according to Onych.
“Has the market been waiting for new proposals? Yes!,” he stressed.
He added that more could be said about the proposal once the detailed draft legislation had been presented. However, based on current knowledge, Onych made a preliminary assessment.
“The element that raises the least doubts is the launch in six months with a budget of 500 million for this year. Again, as with BK2%, we will be dealing with a limited pool of funds. That is, we know that there will be promotion, and we know that we need to act fast to get caught up. If the government does not include price per m2 in the draft caps, we will once again be watering the bonfire with petrol – another strong price driver will emerge. The supply side may want to hold off on selling until the launch, well, and prices will rise again,” according to Onych.
“Setting a cap on the subsidy rather than the total purchase price means that the value of the dwelling and therefore the total loan amount will be allowed to be higher than under the previous programme. This surplus will be at standard interest rates, which means that 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 amount of the loan and the amount of the subsidy). Due to such a construction, the attractiveness of the whole solution will be lower the more the amount of the loan above the set limit of subsidies we will want to take out,” he indicated.
For example, if a single wants to take out a loan for 400,000 in a bank where the standard offer is 7%, roughly speaking the interest rate (over the subsidy period, which is supposed to be 10 years) will be 4.25% (from half of the loan 1.5% and from the other half 7%). Of course, this makes the situation a little easier for buyers in the largest cities, where average prices per m2 of flats last year reached several thousand PLN (in Warsaw alone, at the end of December, it was already PLN 16.4 thousand per m2) and those willing to take advantage of the subsidy were forced to choose much smaller flats, explains the director.
On the other hand, in addition to the cost of the loan itself, there are still, invariably, questions about the availability of credit due to the way creditworthiness is calculated – something that has been a major blocker in 2022 when taking out traditional loans – especially in a situation where we will be faced with a loan that significantly exceeds the subsidy limit.
Additionally, a sensitive element is the issue related to the income criterion. How will the creditworthiness be calculated in the case of self-employed people settling in a lump sum (where there is no such thing as net income, because no expenses are documented). In the case of people who are self-employed, this may induce some to generate additional costs (e.g. acceleration of planned one-off expenses) in order to catch up with the limit (according to the announcements, the average of the last 6 months is to be counted), according to Otodom.
The loan (the part subject to subsidies) is to have an interest rate between 0% and 1.5%. However, the question is whether, as was the case with BK2%, this will be contractual (and will in fact depend on the offer of the respective bank), or whether top-down each bank will have to apply this exact interest rate.
So here we have (based on media reports):
– A limit on the amount of subsidies, but theoretically this does not mean a maximum amount of credit (if this is in fact the case, then the whole offer in terms of credit costs will be a cluster of two credits, one with subsidies and one traditional, so the cost of credit and interest rates will average out)
– Income limit – but it does not have to apply, because it is partly abolished by the “zloty for zloty” principle – what will a given zloty, or rather a declared 50 cents, reduce? the subsidy limit or the value of the monthly subsidy?
– Lack of information about the minimum/maximum own contribution and whether it can be combined with the Housing without own contribution programme
– We also do not know whether there will be decreasing instalments during the first 10 years of repayment (remember that decreasing instalments require a higher creditworthiness than equal instalments). In such a situation, especially when someone wants to take out a much higher loan than the subsidy limit, e.g. a single of 400,000, it may turn out that the required creditworthiness will be very similar to what would be required when taking out a normal loan, but in equal instalments, they mentioned.
Without answers to these questions it will be hard to judge whether this is a better scheme. It looks like the pool of potential borrowers will be larger. On the other hand, it seems that the scheme will target buyers of larger homes and families with children more than singles and therefore potentially first-time home buyers, Otodom reported.
In the case of larger families, the cost of taking out such a commitment is likely to be lower than with BK2% (a fairly high subsidy limit is proposed); of course, everything will depend on the total loan amount. In the case of singles and two borrowers, especially taking a loan amount in the range of 400-500 thousand or higher, the effective cost of the loan will definitely be higher than with BK2%.
“In contrast to the 2% Safe Loan, where, regardless of the amount (within the allowed amount), the cost of the loan during the subsidy period was relatively constant and hovered around or slightly above 2%, in the new proposal titled ‘Housing for starters’ the cost of the loan will be significantly higher than in the BK2%. In the new ‘Mieszkanie na start’ proposal, the cost, and thus the profitability of the solution will be highly variable in a situation where we want to take out more credit than the amount of the subsidy (and given the amount of the subsidy, I expect that this will be a fairly common situation). And it will depend both on the family situation, the total amount of the loan and its relation to the amount of the subsidy and the borrower’s income (the ‘zloty for zloty’ principle announced by Minister Hetman),” concluded Onych.
Yesterday, Minister of Development and Technology Krzysztof Hetman announced that the new housing programme, which will be the successor to the ‘2% Safe Credit’, should start in the second half of 2024 and around 50,000 people could benefit from it this year. Subsidised instalments will only be available for loans taken until the end of 2025.
Source: Otodom and IBSnews
