A phenomenon worth discussing is the unevenness of sales drop observed in individual cities, largely related to the effects of closing of  FOH.  In Q1 the decrease was more dynamic in markets where the program had considerable impact on sales recorded in late 2012, e.g. Gdańsk, Wrocław and Warsaw. In   cities where the program had limited effect on sales of new dwellings and offered the same amount of support to the secondary market, quarter-on-quarter sales decline was less sharp. Kraków, with very few loans for purchase of  FOH-subsidized  new units, recorded rising sales over the last quarter. 

Falling inflation and reduction of interest on mortgage loans following it were key phenom-ena in the market environment during the past four quarters. In April 2013 in most banks interest on mortgage was at 4.5%  -  5.0%, compared to 6.0% - 7.0% twelve months earlier. Due to the fact that a great majority of mort-gages today are taken out in Polish zloty, each reduction of interest rates means growth of creditworthiness. If predictions of low and stable inflation within the next two years prove accurate, we might witness the lowest interest on mortgage loans in the history of the Polish housing market: at 4.0-4.5%, and in some instances even below 4.0%. Low interest rates are beneficial not only to buyers, but they also will reduce loan costs for developers, which will partly neutralize higher costs introduced by the Developer Act. With lower prices and lower interest rates increases the profitability of investing in dwellings purchased for lease. Also the relative attractive-ness of such projects will improve. Finally, lower interest rates mean lower installments for loans already taken out in Polish zloty, and consequently a better climate for increasing new loans in banks. 

The first three months of the year, in turn, brought no new information on the next program supporting residential purchases. There are many signals that after positive interministerial agreements the program will eventually be introduced, although in 2014 its scale will be limited. Taking into consideration the present stage of legislative work and the need to pass the bill by the parliament, the date of first payments announced for January 2014 might need to be postponed. Supply According to the results of REAS survey, in Q12013 six urban centers (Warsaw, Kraków, Wrocław, Tri-City, Poznań and Łódź) launched sales of 4,700 dwellings, i.e.  over 2,000 less than a quarter ago. This figure was the lowest since Q3 2009. 

Despite this, the results for the last four quarters are relatively good: the analyzed cities released nearly 30,700 units, an amount almost identical to that recorded for the whole year 2010. We are therefore witnessing another consequence of the introduction of Developer Act: at first a record-high number of new projects released to the market in early 2012 and later a sharp deceleration. Although more than eight months have now passed since the introduction of new regula-tions, a large portion of dwellings launched for sale in Q1 2013 are still offered without escrow accounts required by the act on protection of buyers’ rights. According to developers these comprise either next stages of previously implemented projects, or new projects formally, although quietly, introduced to the market before April 29, 2012.

For the full overview please contact Tali@profimex.com

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