Healing the housing industry
During a business breakfast organized by the Warsaw Business Journal, representatives of the government and the development and construction industries discussed problems facing the residential property market and their possible remedies.
The new Minister for Transport and Housing, Jerzy Polaczek, didn't specifically talk about the new government's plans for the sector, but rather expressed his willingness to listen to the industry's concerns. However, he pointed out that the new name of the Ministry (formerly known as the Ministry of Infrastructure) shows what the government's priorities are.
In short supply
The low supply of housing is seen as the main problem by representatives of the sector.
This, however, doesn't mean that the construction industry is in deep crisis. Jeremi Mordasewicz, an adviser to the board of the Polish Confederation of Private Employers (PKPP) Lewiatan, explained that the sector still provides around 5.5 percent of GDP, which is just under the EU average of 5.9 percent. The main reason for the inadequate number of flats being built is the lack of Spatial Development Plans, which limits the land available for investors to build apartment blocks on.
Those plans should be prepared by the local authorities, but at the moment this is not happening.
"We have become hostages of the local governments," Mordasewicz said, emphasizing widely held concerns about the standard of local authorities. Mordasewicz appealed to Minister Polaczek to see that the government concentrates on the macro-scale regulations instead of wasting time on issues best left to developers and investors. Some members of the industry suggested that the government force local authorities to prepare the necessary plans.
The vice-president of the Polish Developers' Association, Marek Poddany, would prefer economic incentives to coercion. On behalf of the government, the Minister promised that everything would be done to create a sustainable growth of supply in the sector - that is, to eliminate all limitations resulting from the Spatial Development Plans as well as improving the situation for investors.
Labor disaster
According to Poddany, currently only around 100,000 flats are built in Poland annually.
"It is not only the matter of the lack of space and plots for building, but also of the weakening potential of the construction companies," he said. The outflow of skilled labor to Western countries is another serious cause for concern.
"We won't be able to build highways without road engineers or buildings without construction engineers," said the president of SAP Projekt, Mieczysław Jakowski. "In the plastering and bricklaying sectors there is a disaster, we will soon have to import workers from Ukraine," he added.
Investors are unified in their opinion that the state could play an important role in organizing training for construction-related jobs, which have not been popular with young people in recent years.
Profits over prices
Growing apartment prices also raised investors' concerns. Poddany denied that high apartment prices are in the developers' best interest. "If we increase turnover, even with a lower margin we would still increase our profits," he explained. "We are interested in increasing our turnover, but we must be given the chance to do so," he added.
Growing prices create a dangerous situation in which most Poles will not be able to buy their own apartments. "A long-term state policy of providing aid for those less well-off is needed," said Sven Torsten Kain, a board member of BRE Bank Hipoteczny. He underlined that in Poland around 70 percent of flats are in private hands, which is one of the highest rates in Europe.
Kain points out that the demand for apartments could be even higher if unemployment was reduced. Poddany is also concerned about possible future price growth. "If VAT for construction materials is indeed raised to 22 percent by 2008 from the current seven percent, the market will not be able to handle it," he said.
Jerzy Polaczek - Minister of Transport and Construction
Responding to issues raised by investors: I can promise that there will be no politics of avoiding these topics on the part of the state. The state will be more active in the field and will facilitate the activities of entrepreneurs in the sector. We will be friendly towards those providing employment.
When asked about PiS' ambitious apartment-building plan: Every year we plan to build no less than 170,000-180,000 new flats.
Marek Zuber - the Prime Minister's economic adviser
On the Property Tax: Sooner or later the Property Tax will be introduced, but I don't think it will happen during this Parliament's term. There is no chance of introducing it now; that would be political suicide. We have to keep in mind that both PiS and PO - the two largest parties - were against the tax in their election campaigns.
Jeremi Mordasewicz - adviser to the board of PKPP Lewiatan
On supply: The limited supply of land for investment is due to three factors: the lack of Spatial Development Plans, problems with the ownership of plots and a limited provision of technical infrastructure ... We have become hostages of the local governments.
On cuts in administration: Administration in Poland is not expensive, it's just inefficient. One of the reasons is low wages. Now, the government promises to save money by introducing cuts in the administration. This will not lead to a cheap state, but rather a rubbish state. We'll have inexperienced graduates working on projects worth tens of millions. This prospect scares me as a citizen and as a builder.
Sven Torsten Kain - member of the board at BRE Bank Hipoteczny
The demand for flats could be much higher if people's economic situation was better. Unemployment is a particularly big problem. If the unemployment rate in Poland was lower, by, let's say, 50 percent, there would be many people who could afford to buy flats.
Marek Poddany - vice president of the Polish Developers' Association
About the growing price of apartments: It is not in the developers' best interests to raise the price of flats. If we increase turnover, even with a lower margin we would still increase our profits. We are interested in increasing our turnover, but we must be given the chance to do so.
Mieczysław Jakowski - president of SAP Projekt
On the shortage of labour: We need training, training and once more training of the labour force. There is a crisis in many sectors of the construction industry. If I train a specialist he is likely to go abroad or be bought by my competition. The government needs to organize training for road and construction engineers. We won't be able to build highways without road engineers or buildings without construction engineers. In the plastering and bricklaying sectors there is a disaster, we will soon have to import workers from Ukraine.
The WBJ's partners are Hotel Le Regina and Skrivanek Translation Services.
