Property plans

The new Minister for Transport and Construction, Jerzy Polaczek, has been doing the real-estate rounds of late and meeting with a host of property and construction industry representatives. The Minister has been casting his net wide to hear opinions before formulating a comprehensive  program for the industry. The most immediate problems he faces are daunting. With demand far exceeding supply in the residential sector the price of homes is rocketing, and the vast majority of apartments are sold before a brick hits the ground. Spatial development plans are few and far between and there is also a major shortage of land and skilled construction workers. The government is also faced with increasing the VAT on housing to 22 percent in 2008.

The blueprint

Now, details of the Minister's plan of action are starting to filter through. The earliest changes were semantic. The name of the Ministry was changed from the Ministry of Infrastructure to the Ministry of Transport and Construction, allegedly to reflect the current Ministry's priorities. Then a new post was created within the department, called the Government's Commissioner to the State's Housing Construction program, which has been taken by Piotr Styczeń.

Housing is the main bugbear. "A level of 180,000 flats being built a year would satisfy Poland's residential needs," says member and general director of the Polish Developers' Association, Jacek Bielecki. But the price of apartments is also a key issue. At the beginning of 2005 the average price per sqm in Warsaw was zł.4,300. Today, it is approximately zł.4,730.

This increase is largely caused by more and more expensive land, a scarcity of contractors, speculation by foreign investors and the prospect of a hike in VAT. According to Bielecki, the latter factor could seriously disorganize the construction sector, as was the case in Hungary. At the same time he believes that there is a good chance to keep the VAT rate at seven percent: "We only have to remind the government about it."

Empty slogans

From the very beginning, Law and Justice (PiS) exploited the need for housing to achieve their electoral ends. "Three million flats in eight years" almost became the party's election slogan, but the Minister has distanced himself from the mantra of late.

Now, he has scaled back the country's flat-construction plans to a more manageable 170,000-180,000 units a year. The Ministry's proposal is to build cheaper standardized flats. Piotr Styczeń gave the existing Towarzystwo Budownictwa Społecznego (TBS) as an example. TBS are social building associations offering flats about 30 percent cheaper than the market price. At the same time, they offer all mod cons, fulfill all the energy saving norms, and are built using advanced technologies.

The government has also fired a warning shot over developers' bows about making sure people can afford flats. At a recent Eurobuild property and construction conference, Styczeń told delegates from the real-estate industry that the government plans to "substantially improve the situation of people who cannot afford any flats." However, the industry must "show some care for those who have no place to live. This is the responsibility of all of us here."

Polaczek also said that the construction law would be amended by Q4 2006. "An overall amendment of the construction law will change the state of current complaints," Polaczek says. He also promised alterations to the spatial plans' development and to retain the seven-percent VAT on housing.

Mortgage subsidies

Polaczek also plans to part-finance mortgages for private individuals, and a project is already underway. According to Piotr Styczeń: "It is estimated to launch payments in the first half of 2006 [after] legislation is introduced in January. In Q3 2006 an increase in residential demand [as a result of these subsidies] should be counterbalanced by an increase in supply of developed areas for construction." Styczeń says the Ministry is also formulating plans to fund repairs to existing buildings by tenants.

Developers complain that the Minister's ideas are favoring demand, which is not a solution. "We see the problem on the supply side. We have nowhere to build," says the vice president of the Polish Association of Developers, Marek Poddany.

"Directing public money at construction does not work in Poland. Extra means for mortgages will reach people whose income is above the average, and not to those who actually need it," says Jeremi Mordasewicz, a board adviser to PKPP Lewiatan.

 

Open to ideas

Still, developers are satisfied with the Ministry's openness and willingness to communicate. Shortly after consultations with the Minister, the president of the Polish Association of Developers, Jarosław Szanajca, said: "We ended our meeting with the Minister with great satisfaction. We have been waiting for it for a long time. Now everything should follow in a good direction." He declared that his organization would keep the government under scrutiny. In view of the ease with which PiS shrugged off its three-million-flats promise, this kind of scrutiny will almost certainly be needed.