Is Safe Credit 2% an opportunity for development of the housing market in Poland?

As of 1 July 2023, the present government‘s flagship programme known as “Safe Credit 2%” comes into force. The programme is part of the government‘s housing policy, which aims to ensure consumer security in the housing market by increasing access to affordable housing for people with incomes not allowing them to buy it on a commercial basis.

Will the Safe Credit 2% and the accompanying regulatory changes actually make the housing market in Poland more accessible to consumers?

To answer this question, lets take a closer look at the changes introduced by the Act of 26 May 2023 on State Aid for Housing Savings (hereinafter as the “Act”).

Let‘s start with the fact that the Safe Credit 2% will only be intended for people planning to acquire their first own residential property, whether from the secondary or primary market, or intending to build their first own single-family house. A person wishing to obtain a credit will not be able to, within 36 months preceding the submission of the credit application, be a party to another mortgage credit agreement, the funds of which were used to purchase a flat or a house (exception is when such an agreement was terminated for reasons for which, for example, the developer was at fault). Unfortunately, people who already own a flat or a single-family house cannot benefit from this programme, even if the property they own does not fully meet their housing needs. Moreover, the age of the potential borrower will be an important criterion. This credit will only be dedicated to those under the age of 45. The exception is a situation where there are two borrowers, with only one of them being over 45. The government estimates that up to 100,000 people will be able to benefit from the credit during the first years of the programme, which, given the abovementioned criteria and the fact that the final decision on granting the credit will depend on a private bank anyway, is a rather optimistic assumption.

The basic conditions of the Safe Credit 2% are that the own contribution must not exceed PLN 200,000, unless the own contribution constitutes a plot of land on which we intend to build a house, or the funds come from bonuses received under the Housing Accounts (Polish: Konta Mieszkaniowe) or Housing Deposits (Polish: Lokaty Mieszkaniowe) introduced by the Act. Then, the value of such plot of land or the value of the funds from the aforementioned bonuses cannot exceed PLN 1,000,000. The credit will be granted in the maximum amount of PLN 500,000 for a single or PLN 600,000 for married couples or persons rising at least one child. The above means that, as a rule, the value of the flat purchased under the credit cannot exceed PLN 700,000 or PLN 800,000 respectively. Importantly, no price limit per 1 m² of flat, will apply in the programme.

The main idea of the Safe Credit 2% is that the first 120 instalments will be subsidised from the state budget. In simple terms, the subsidy will consist in the difference between the amount of a credit instalment at a fixed interest rate based on the average interest rate for fixed-rate credits in commercial banks and the amount of a credit instalment at an interest rate of 2%. Initial simulations estimate that the subsidies will cover up to half of the credit instalments. After repayment of 120 instalments (in principle after 10 years), the credit will be repaid in the form of a fixed capital and interest instalment, but at market conditions. What will the instalments be after 10 years? Unfortunately, we are unable to estimate this at the moment. Everything will depend on the economic situation prevailing at that time.

It should also be borne in mind that we will not receive a credit for the purchase of a flat that we acquire or intend to acquire on the basis of a reservation or development agreement concluded from the so-called “second hand”, i.e. on the basis of an assignment and not directly from the developer.

The above is justified by the fact that the present government intends to fight against “trading” in assignments of development agreements and reservation agreements. According to those in power, this kind of trading promotes a reduction in the availability of housing offers directly from developers and also increases the cost of the property acquisition itself.

The aftermath of the above position are the amendments to the Act of 20 May 2021 on the protection of the rights of the purchaser of a residential unit or single-family house and the Developer ‘s Guarantee Fund (the so-called: “Developer ‘s Act”), which were introduced together with the Safe Credit 2%.

At present, it will not be possible to assign a reservation agreement for a particular flat. This is because such an action will be null and void by operation of law. An exception to this is if the assignment is made to the immediate family, i.e., for example, spouse, siblings, grandparents, in-laws (these are persons in I or II tax group listed in the Act on Inheritance and Donation Tax).

The possibility of assigning development agreements has also been significantly restricted. The Act does not introduce a provision declaring such agreements legally invalid, but it does introduce criteria on which the possibility of lawful assignment will depend. Thus, a purchaser who is a party to a development agreement will be able to make an assignment of that agreement only if it concerns only one flat (house) and he has not concluded another assignment of the development agreement within the last three years. As in the case of reservation agreements, the exception is the situation, when the assignment will be made to the next of kin, then the restrictions do not apply.

We will only be able to assign the development agreement in the form of a notarial deed. What is more, in the deed itself, we will have to make a representation, from which it will follow that we fulfil the conditions referred to above and under pain of criminal liability. These restrictions will only apply to agreements concluded after the entry into force of the legislation.

So will the changes described above have an impact on increasing the availability of housing and the development of the housing market in Poland? Of course, there can be only one answer to such a question; everything will be verified by the market and the current economic situation. The changes introduced are certainly a simplification for consumers intending to purchase their first own flat.

Ultimately, it is the private bank that will make the decision to grant the Safe Credit 2% based primarily on the individual’s creditworthiness. From a logical point of view, this creditworthiness will most likely be calculated not only for the first 120 instalments, but for the entire term of the credit. Secondly, the restriction of trade in assignments of developer agreements will undoubtedly result in an expansion of housing offers aimed directly to consumers, but it will not necessarily affect their prices. And it is the current housing prices that are the main obstacle for a consumer wishing to acquire his or her first flat on his or her own.