House of pain
The construction sector's contribution to the growth of the Polish economy in 2005 was bigger than any other sector. Last year output increased by 6.5 percent. By comparison, industry grew by 3.9 percent and services by three percent. The Polish Chamber of Commerce (KIG) says the construction sector had its best result in six years.
But the continuation of this success is doubtful. This year started with a series of construction accidents, the worst housing budget ever, and an outflow of skilled foremen. Considering the huge deficit of flats and the lack of qualified workers to build them, the future does not look bright. As the head of KIG Andrzej Arendarski points out, construction can only be the engine for economic growth if it functions well. Yet, construction in Poland, and especially its residential sector, is still an ailing mechanism built on unstable foundations.
Best laid plans
Law and Justice's electoral pledge to build three million flats in eight years disappeared as soon as the party won the elections. Now the Ministry of Transport and Construction is talking about half that figure. "According to our estimates 1.5 million to 1.8 million flats should be delivered, including 150,000 in community housing, 200,000 flats for rent, 800,000 flats built by developers and up to 350,000 flats built thanks to mortgages aided by the budget [as part of the government's special program to help families purchase their first flat]," said the Secretary of State in the Ministry of Transport and Construction, Piotr Styczeń.
These plans, regardless of the original three million, are themselves quite optimistic, given that only 0.1 percent of GDP from the state budget is designated for housing this year. The average for EU countries is one to two percent of GDP. "It has not been known in the whole of Poland's post-war history that such a small amount from the budget was designated for housing construction," says the head of the Construction Congress, Roman Nowicki. He stressed that while the EU average is 400 flats per 1,000 citizens, in Poland there are only 320.
Although surveys, including those by research firm ASM, confirm that about 100,000 flats will be added to the market annually, Nowicki fears that the same number will be liquidated due to bad condition and wear. "In 10 years 800,000 flats will have to be pulled down due to their bad technical state," he says.
Unfavorable conditions
Experts agree that despite growth of 7.6 percent in construction-assembly production last year, the construction sector constantly faces unexpected difficulties. According to Arendarski, in order to create favorable conditions for the construction business, reform of public finances is necessary to heal the enormous budget deficit, and steps also have to be taken to increase the absorption of EU funds.
However, the first problem to tackle is in the legal sphere, especially in the case of spatial development plans. As all developers and specialists would agree, it is the lack of these plans that is the major barrier to investment. According to ASM, 17 percent of the country is covered by plans, but according to the Construction Congress it is as little as 12 percent.
"We need a law that will force gminas to introduce local master plans," suggests Nowicki. Although construction law was amended last year, the changes just caused chaos. "Several dozen amendments to the construction law in several months causes confusion; it was not a step forward," complains the head of the construction committee at KIG, Edward Szwarc.
Opposite opinions
The Ministry of Transport and Construction seems to have a different view on the problems in the construction sector. Styczeń claims, quite contrary to the experts' view, that in Poland the demand for flats is not that big. "We have to examine the demand in every part of the country," he says, claiming that the supply has migrated to the big cities due to the lack of demand in the smaller towns. "Poland is being built in a very uneven way. The Warsaw market is significant but there is huge potential elsewhere."
Styczeń is impressed by the housing situation in the capital: "Warsaw sets high standards for construction in the country. It has a huge capital of developers at its disposal." Nowicki disagrees: "Warsaw is being harmed when it comes to city planning. What is happening here is inexcusable. Rows of cupboards are being built as a result of informal deals." Nowicki emphasizes that Poland needs governmental tools to boost demand.
New promises
Styczeń assures that the government's task is to make the number of flats grow faster than the two percent forecast by ASM (117,000 flats a year): "We are introducing changes in housing legislation, especially concerning flats for rent." As to the lack of land for residential development, Styczeń says that the Ministry wants to take over land owned by the Agricultural Property Agency and the Military Property Agency and designate it for housing construction.
At the moment there is a deficit of 1.5 million flats in Poland - the difference between the number of households and the amount of dwellings available. It is estimated that the deficit might increase up to 2.5 million, as the number of households is increasing faster than the number of flats.
According to a census taken in 2002, only one in three Poles lives in very good or good conditions, equivalent to housing conditions in Western Europe. One fourth of the dwellings in Poland were built before 1945 and only 12 percent was delivered after 1990. Despite its construction boom, Poland still has some of the worst housing conditions in Europe.
