Mortgage Lending In Poland - 2009

Deficit of residential real estate.

Deficit of residential real estate is still one of key social problems in Poland. Around 38 million inhabitants or 14 million households live in ~12 million populated dwellings, meaning a gap of up to 2 million dwellings. The existing housing stock is on average old and frequently lacking basic amenities. As a result the perspectives on demand side for residential real estate remain very strong. However, the key to market growth is today house affordability. The recent explosion of prices resulting from combined: strong demand, easy credit and limited supply, pushed house prices extremely high and led to current standstill on both new and existing real estate markets

Evolution of mortgage lending.

The supply of mortgage lending remained stable up to Q3 2008, when the inter-bank market was hit hard by disappearing liquidity and shortage of FX funding. As a result many major mortgage lenders have rapidly tightened lending conditions and increased margins and fees substantially. Few banks withdrew FX-denominated products while others almost stopped any new mortgage lending. Thanks to very favourable Q1-Q3 2008, in FY2008 banks managed to sell ~ PLN 57 bn in new mortgage loans, a 2 % increase vs.2007. However, the number of new contracts dropped vs. 2007 by ~8% to 286 thousand

Quality of mortgage lending and risks ahead.

During 2008 the quality of mortgage loans continued to improve and the NPL ratio fell to 0.5% for FX-loans and to 1.8% for loans in local currency. Unfortunately the sudden depreciation of local currency against Swiss franc, observed in Q4 2008 and Q1 2009, together with increasing unemployment is likely to produce higher NPL ratios in 2009. As of now, this trend is not expected to grow to the levels known from other developed markets since most of mortgages are not very big in value, they typically finance the first dwelling of the owner, and finally the government is planning temporary lifelines for mortgage debtors loosing their jobs

Future opportunities.

Increasing wealth of individuals, growing economy and the deficit of residential real estate are factors that are still valid and are expected to drive the demand for real estate and mortgage lending in future. In mid-term perspective a significant price correction (20-30%) seems unavoidable since the number of new completions is on record high. The possible adjustment of prices in 2009/2010 is likely to stimulate demand for real estate and revive mortgage lending. Intelace Research expects that mortgage lending portfolios of banks will keep increasing through 2011, when it will reach PLN 275 bn in nominal terms erms.