Phasing out the 2% Safe Loan Program Is Unwise, Says Expert

    The termination of the 2% Safe Loan Program had a notable impact on the housing market even before its implementation, according to Bartosz Turek, the Chief Analyst of HRE Investment Trust (HREIT). Turek expressed his expert opinion that discontinuing the program was imprudent.

    During the first half of this year, we witnessed a loosening of credit taps, a decrease in loan interest rates, and a decision by the Financial Supervision Authority (KNF) allowing banks to more liberally assess creditworthiness. This positively influenced the demand for housing. Additionally, the impending introduction of affordable and easily accessible housing loans further motivated buyers.

    Turek explained that the development of the 2% Safe Loan Program in 2023 progressed dynamically, and there was a growing belief that its implementation would lead to a surge in housing demand and prices. Consequently, many individuals, especially those who might not qualify for subsidized loans, decided to purchase homes before the government program took effect. This phenomenon became so widespread that it became a self-fulfilling prophecy – the supply was depleted, and housing prices rose even before the 2% Safe Loan Program was launched.

    The program officially started in July, providing an opportunity for individuals who previously had no chance of owning a home to obtain a housing loan. Turek emphasized that the 2% Safe Loan significantly shortened the path to homeownership by more than half. The program allowed applicants with lower incomes than those required for standard mortgages to apply, replacing the required down payment with a guarantee provided by the Bank Gospodarstwa Krajowego (BGK – the national development bank – ed.). Moreover, the monthly repayments were considerably lower than those for regular loans, making it the most generous program in the history of the domestic housing market.

    However, Turek pointed out a downside to the 2% Safe Loan – the observed pressure on price increases. He acknowledged that this pressure was compounded by favorable labor market conditions, easier access to mortgages, and declining interest rates.

    Despite the criticisms, Turek highlighted the positive aspects of the subsidy program. Developers were quickly motivated to act, and many individuals excluded from the housing market had the opportunity to fulfill their dreams of homeownership. Additionally, purchasing a home with a subsidized loan was cheaper than paying rent, reducing pressure on the rental market. The subsidies also hindered the expansion of funds creating rental property portfolios in Poland, while increased activity in the housing market provided a boost to the economy and substantial revenues for the state budget, according to an HREIT representative.

    Turek expressed regret over the decision to phase out the 2% Safe Loan Program at the end of the year. The surge in demand and developer response led to a rebuilding of the supply, causing a decline in the rate of price growth. This adjustment allowed more citizens to afford their first homes.

    He drew attention to the third demand shock in 2023 triggered by the looming end of funds for the 2% Safe Loan. In the last weeks of the year, concerns about the shortage of funds led many eligible individuals to seek inexpensive and relatively accessible financing. As a result, the supply of homes for sale sharply decreased in December, with data from Unirepo indicating a one-third reduction in available properties in provincial cities compared to the previous year.

    On Thursday, the Ministry of Development and Technology announced that the statutory cumulative limit for 2023 and 2024 for subsidies to the 2% Safe Loan had been exhausted. The ministry is actively working on a new support formula for borrowers, emphasizing that the previous limits were based on the assumption that approximately 50,000 loans would be supported in 2023 and 2024, while by December 21, 2023, around 55,800 credit agreements had been signed, depleting the allocated funds. Consequently, starting the new year, the acceptance of new applications by participating banks in the program will be suspended.

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