The new ownership society
Shopping around for a mortgage is a daunting prospect. Never a simple proposition, it can easily be snared in the confusing requirements of a lender, or hindered by tardy employers. But the bumpy road to long-term finance has not deterred a growing army of would-be home owners keen to secure the pad of their dreams. Now that the immediate economic prospects look bright, increasing numbers are preferring to invest monthly payments into a property they own, rather than a home they rent, prompting banks to identify mortgages as a key growth area.
Double digits
Figures show the value of new home loans granted in Poland last year was around zł.14 billion, up 25 percent on 2003, and that the overall mortgage market expanded by a fifth to zł.36 billion.
This growth in loans has had a major impact on the banking sector. At the moment, Polish banks account for a third of the zł.310 billion total capitalization of the Warsaw Stock Exchange. PKO BP and Pekao SA, the market leaders, both boosted net earnings by double-digit percentages to record highs, while third-placed BPH recorded a doubling of profits, all thanks to strong growth in demand for home loans.
"This is absolutely not the limit of banks' profitability," the head of the General Inspectorate of Banking Supervision (GINB), Wojciech Kwaśniak, told Reuters recently.
Kwaśniak's enthusiasm is shared by mBank's mortgage chief Maciej Garwacki: "There is tremendous potential for growth in Poland. The value of Poland's mortgage portfolio stands at 3.7 percent of gross domestic product, compared to around 40 percent for some Western European countries.
"I expect the dynamics to be slightly lower but still achieve something like 20 to 30 percent growth on the current position, and I think we can expect this up until around 2007," he said.
Dismissing the figures
The growth in mortgages reflects the buoyancy of the country's developing property market. Recently, figures analyzed by the London-based Royal Institution of Chartered Surveyors were so strong that, while preparing a report, it initially discounted the Polish growth statistics. Having subjected the figures to more detailed scrutiny, the institution placed Poland alongside the likes of France, Spain, Ireland and Great Britain in the winners enclosure for pulling past the two-digit growth post for apartment prices.
More flats please
These rising prices are fueled by demand for property. However, as data released by the Organization for Economic Cooperation and Development (OECD) highlights, it is here where Poland's particular situation is revealed. The OECD calculates that there is a shortfall in housing supply of at least one million flats and that construction rates fall way behind national requirements. Currently, just 2.3 new flats are built per 1,000 head of the population. In France this figure is 5.1 per 1,000, in Spain 13.8 and in Ireland 14.1. According to one OECD forecast, it will take 120 years to replace existing poor-quality flats with new ones.
For players in the mortgage market, statistics like these add up to a bright future.
Bank Pekao SA spokesperson Robert Moreń said: "This year our bank will be tied very much to mortgage sales because they are one of the drivers of our growth. Our expectation is that mortgages should increase this year between about 20 and 30 percent."
Moreń says the foundations for growth were laid when Poland began realizing its plan to join the EU. "The main factor behind this rise in mortgages is the improvement in Poland's economic situation and that has had a dramatic effect," he said.
Falling rates
"People have had more and more money and they use this not only for consumption but also for mortgages because they see that it pays to borrow money instead of using their own. We are moving in the direction of foreign societies where, when people have more money, they end up wanting more things. If you take the US, they have an average level of debt of around $44,000. We are nowhere near this, but people are increasing their debt levels.
"For years people had to rent an apartment because they could not afford a mortgage when the interest rate was 20 percent or 30 percent, as a result of high inflation.
"But in the złoty mortgage market two years ago interest rates dropped significantly. They increased last fall but they are going down again and mortgages are now relatively affordable. Now people don't want to pay monthly rent, they would rather spend the same amount of money to pay back a mortgage and live in their own apartment. This is the main change and this has fueled mortgage sales.
Future foundations
"One key factor is that the perception of mortgages has changed. However, probably the most important factor is that mortgages have become much more affordable," says Moreń.
GINB's Kwaśniak says banking profits this year will follow thanks largely to a post-EU investment boom. Mortgages will continue to grow thanks to cheaper credit and worries that prices will close the gap with Western Europe. "As far as home loans are concerned I would expect a similar pace of growth this year," Kwaśniak said.
In the hotly-contested arena of mortgages more and more companies are attempting to specialize in order to gain an edge.
mBank, the leading internet service, saw its mortgage portfolio grow by more than 100 percent. Since it launched on the mortgage market two years ago mBank has increased its share of agreed mortgages to 2.2 percent of the market.
Garwacki says his customers are internet savvy and becoming increasingly affluent.
The average lend
"What we are seeing in general is demand on both the primary and secondary [buying-to-let] markets. Developers are putting up a large amount of buildings and there is still a significant shortfall.
"The amount we are lending has increased too. Two years ago we were lending an average of zł.85,000. This rose to zł.135,000 last year." Although mBank offers loans in dollars, euro and złoty, it is Swiss francs that most of its customers prefer (87 percent).
This is in stark contrast to Bank Pekao SA, where customers are only offered deals in the Polish currency.
Last year Pekao nearly doubled the number of mortgages made to a total of zł.1,568 million from zł.786 the year before. The rate at which customers have been flocking to their deals can be seen by their increase in the total (all currency) market share, which hit 12.1 percent from 6.1 percent in 2003. "This means our mortgage sales in złoty are growing faster that the average market. So if you want to know whether it pays off to operate only in złoty - yes, it pays," adds Moreń.
The question of whether to borrow in złoty or currencies with a lower interest rate is a chief concern of many customers. The deputy managing director of currency traders TMS Brokers, Paweł Flak, believes customers must be aware of the risks associated with borrowing in other currencies, but at the same time expects an increase in euro-denominated loans.
That'll do nicely
"People will invest in currencies that have the lowest nominal interest rates, so customers are attracted to euro and Swiss franc loans. Only the Japanese yen is more favorable but this is not a popular currency in Poland," said Flak.
"For home loans it seems wise to borrow in the currency in which you are earning to avoid shortfalls in currency fluctuations. Poland's currency is big and it can be dangerous for people to borrow on foreign markets, especially when you are talking about the home where you live."
Flak says the approach of monetary union will refocus both the market and customers. "I expect mortgage customers to increasingly invest in euro loans and Swiss franc loans in a few years' time as we move closer to joining the eurozone," he added.
Although the fundamentals look in fair form, Pekao's Moreń says there some clouds on the horizon.
"What we would like to do is grow further but there are still questions marks, with the major one being the political situation. If investors start pulling out, the złoty will start losing its value and Polish people will not invest money because they will want to secure money for a worsening economic situation."
In the zone
However, he maintains that despite any political barriers, the longer term outlook is heartening.
"This increase in mortgages and the increase in affluence should be put in the context of European enlargement because this simple element has provided the basis for this growth.
"It is not a coincidence that this year and last year the Polish economy was quite good - we recorded a record high net profit of zł.1,343 million. EU membership has improved consumer confidence, it has spurred foreign investors to come to Poland, and Polish companies, especially SMEs, are doing better and better."
With such positive trends set to continue, more and more Poles are likely to feel at home with mortgages of their own.
Double digits
Figures show the value of new home loans granted in Poland last year was around zł.14 billion, up 25 percent on 2003, and that the overall mortgage market expanded by a fifth to zł.36 billion.
This growth in loans has had a major impact on the banking sector. At the moment, Polish banks account for a third of the zł.310 billion total capitalization of the Warsaw Stock Exchange. PKO BP and Pekao SA, the market leaders, both boosted net earnings by double-digit percentages to record highs, while third-placed BPH recorded a doubling of profits, all thanks to strong growth in demand for home loans.
"This is absolutely not the limit of banks' profitability," the head of the General Inspectorate of Banking Supervision (GINB), Wojciech Kwaśniak, told Reuters recently.
Kwaśniak's enthusiasm is shared by mBank's mortgage chief Maciej Garwacki: "There is tremendous potential for growth in Poland. The value of Poland's mortgage portfolio stands at 3.7 percent of gross domestic product, compared to around 40 percent for some Western European countries.
"I expect the dynamics to be slightly lower but still achieve something like 20 to 30 percent growth on the current position, and I think we can expect this up until around 2007," he said.
Dismissing the figures
The growth in mortgages reflects the buoyancy of the country's developing property market. Recently, figures analyzed by the London-based Royal Institution of Chartered Surveyors were so strong that, while preparing a report, it initially discounted the Polish growth statistics. Having subjected the figures to more detailed scrutiny, the institution placed Poland alongside the likes of France, Spain, Ireland and Great Britain in the winners enclosure for pulling past the two-digit growth post for apartment prices.
More flats please
These rising prices are fueled by demand for property. However, as data released by the Organization for Economic Cooperation and Development (OECD) highlights, it is here where Poland's particular situation is revealed. The OECD calculates that there is a shortfall in housing supply of at least one million flats and that construction rates fall way behind national requirements. Currently, just 2.3 new flats are built per 1,000 head of the population. In France this figure is 5.1 per 1,000, in Spain 13.8 and in Ireland 14.1. According to one OECD forecast, it will take 120 years to replace existing poor-quality flats with new ones.
For players in the mortgage market, statistics like these add up to a bright future.
Bank Pekao SA spokesperson Robert Moreń said: "This year our bank will be tied very much to mortgage sales because they are one of the drivers of our growth. Our expectation is that mortgages should increase this year between about 20 and 30 percent."
Moreń says the foundations for growth were laid when Poland began realizing its plan to join the EU. "The main factor behind this rise in mortgages is the improvement in Poland's economic situation and that has had a dramatic effect," he said.
Falling rates
"People have had more and more money and they use this not only for consumption but also for mortgages because they see that it pays to borrow money instead of using their own. We are moving in the direction of foreign societies where, when people have more money, they end up wanting more things. If you take the US, they have an average level of debt of around $44,000. We are nowhere near this, but people are increasing their debt levels.
"For years people had to rent an apartment because they could not afford a mortgage when the interest rate was 20 percent or 30 percent, as a result of high inflation.
"But in the złoty mortgage market two years ago interest rates dropped significantly. They increased last fall but they are going down again and mortgages are now relatively affordable. Now people don't want to pay monthly rent, they would rather spend the same amount of money to pay back a mortgage and live in their own apartment. This is the main change and this has fueled mortgage sales.
Future foundations
"One key factor is that the perception of mortgages has changed. However, probably the most important factor is that mortgages have become much more affordable," says Moreń.
GINB's Kwaśniak says banking profits this year will follow thanks largely to a post-EU investment boom. Mortgages will continue to grow thanks to cheaper credit and worries that prices will close the gap with Western Europe. "As far as home loans are concerned I would expect a similar pace of growth this year," Kwaśniak said.
In the hotly-contested arena of mortgages more and more companies are attempting to specialize in order to gain an edge.
mBank, the leading internet service, saw its mortgage portfolio grow by more than 100 percent. Since it launched on the mortgage market two years ago mBank has increased its share of agreed mortgages to 2.2 percent of the market.
Garwacki says his customers are internet savvy and becoming increasingly affluent.
The average lend
"What we are seeing in general is demand on both the primary and secondary [buying-to-let] markets. Developers are putting up a large amount of buildings and there is still a significant shortfall.
"The amount we are lending has increased too. Two years ago we were lending an average of zł.85,000. This rose to zł.135,000 last year." Although mBank offers loans in dollars, euro and złoty, it is Swiss francs that most of its customers prefer (87 percent).
This is in stark contrast to Bank Pekao SA, where customers are only offered deals in the Polish currency.
Last year Pekao nearly doubled the number of mortgages made to a total of zł.1,568 million from zł.786 the year before. The rate at which customers have been flocking to their deals can be seen by their increase in the total (all currency) market share, which hit 12.1 percent from 6.1 percent in 2003. "This means our mortgage sales in złoty are growing faster that the average market. So if you want to know whether it pays off to operate only in złoty - yes, it pays," adds Moreń.
The question of whether to borrow in złoty or currencies with a lower interest rate is a chief concern of many customers. The deputy managing director of currency traders TMS Brokers, Paweł Flak, believes customers must be aware of the risks associated with borrowing in other currencies, but at the same time expects an increase in euro-denominated loans.
That'll do nicely
"People will invest in currencies that have the lowest nominal interest rates, so customers are attracted to euro and Swiss franc loans. Only the Japanese yen is more favorable but this is not a popular currency in Poland," said Flak.
"For home loans it seems wise to borrow in the currency in which you are earning to avoid shortfalls in currency fluctuations. Poland's currency is big and it can be dangerous for people to borrow on foreign markets, especially when you are talking about the home where you live."
Flak says the approach of monetary union will refocus both the market and customers. "I expect mortgage customers to increasingly invest in euro loans and Swiss franc loans in a few years' time as we move closer to joining the eurozone," he added.
Although the fundamentals look in fair form, Pekao's Moreń says there some clouds on the horizon.
"What we would like to do is grow further but there are still questions marks, with the major one being the political situation. If investors start pulling out, the złoty will start losing its value and Polish people will not invest money because they will want to secure money for a worsening economic situation."
In the zone
However, he maintains that despite any political barriers, the longer term outlook is heartening.
"This increase in mortgages and the increase in affluence should be put in the context of European enlargement because this simple element has provided the basis for this growth.
"It is not a coincidence that this year and last year the Polish economy was quite good - we recorded a record high net profit of zł.1,343 million. EU membership has improved consumer confidence, it has spurred foreign investors to come to Poland, and Polish companies, especially SMEs, are doing better and better."
With such positive trends set to continue, more and more Poles are likely to feel at home with mortgages of their own.
