Crumbling foundations

Now, not only has the government withdrawn from the pledge, it also wants to cut the funds earmarked for residential building in next year's budget.

"The building industry is the driving force of the economy. One złoty invested in the sector generates three or four in other sectors. Today only a little more than 600,000 people are employed in the field, whereas the number reached a million in the past," says Andrzej Malinowski, president of the Confederation of Polish Employers (KPP).

According to KPP, between 1992 and 2003 spending on residential construction varied from zł.2 to zł.3 billion. In 2006 it fell to zł.1 billion and the 2007 budget envisions even less money. No amendments to laws which would facilitate the house-building sector have been made, nor has the government worked out a definition for social housing, which, according to EU Directive VI, would be subject to a reduced seven-percent VAT rate. In the meantime the Finance Ministry has noticed some legal loopholes which would allow houses with swimming pools and tennis courts to be viewed as social housing. Now the Ministry wants to introduce its own system of tax rebates.

"Within eighteen months the price of apartments may grow by another 15 percent, which could lead to a regress in the building sector," says Malinowski.

Some 1.6 million families are waiting for a new apartment and 40 percent of today's price per sqm is made up of various taxes.