Poland's Development Ministry has announced plans for a new mortgage subsidy scheme for first-time home buyers, which it hopes to launch early next year.
But two other ministries, the central bank and trade unions have expressed concern that the scheme could put further upward pressure on house prices, which are already rising at Europe's fastest pace with annual growth of 18 percent in the first quarter of this year.
Polish home prices rose 18% year-on-year in the first quarter of 2024, the highest in the EU for the second consecutive quarter https://t.co/fA5FakYbER
— Notes from Poland 🇵🇱 (@notesfrompoland) July 7, 2024
The price hikes are partly due to a well-received subsidy scheme for first-time home buyers introduced last year under the previous Law and Justice (PiS) government.
That scheme ended in January, but the new government that took office in December has promised to launch its own new scheme. On Tuesday this week, the Ministry of Development tabled an updated version of the bill outlining the terms of the proposed scheme.
The grant is aimed primarily at first-time homebuyers, with an exception for households with at least three children who already own a home.
Single people can participate as long as they are under 35. There is no age limit for households with two or more people. Couples do not need to be married to benefit from the program.
Sorry for interrupting you while you read on. Article continues below.
Notes from Poland is run by a small editorial team and published by an independent, non-profit organisation funded by reader donations. Without your support, we could not do our work.
The amount of the loan subsidy varies depending on the number of people in a household. Couples and singles with no children receive a 1.5% mortgage interest rate, households with one child receive 1%, households with two children receive 0.5%, and households with three or more children receive 0%.
The difference between the market interest rate and the guaranteed interest rate under the program is paid by the state.
The planned new system, in contrast to last year's system, introduces income thresholds that limit subsidies to high-income earners, but those living in cities where house prices are at least 25 percent higher per square meter than the national average will be eligible for larger subsidies.
There is no upper limit on mortgage amounts, but only amounts between 200,000 and 600,000 zlotys are eligible for subsidies, depending on the size of the household.
Our Project, or Kredici Mieszkaniovim #nastart! agree Follow https://t.co/2sE1hmHgKh pic.twitter.com/9jOR1fv9mx
— WNP.PL (@wnppl) July 17, 2024
There are also limits on the size of homes that can be purchased under the scheme, with a maximum of 50 square metres (538 square feet) for a single person, plus an additional 25 square metres for each additional person in the household.
The Development Ministry estimates that loan subsidies will cost the country 19.4 billion zlotys (4.51 billion euros) between 2025 and 2034, of which around 17 billion zlotys (3.96 billion euros) will go towards new programmes and the rest to programmes launched under the PiS government.
But the plan has already drawn criticism from other government departments. In a comment on the bill, the Ministry of Finance wrote that “the proposed measures could lead to a disproportionate increase in housing market prices.”
Similar concerns were expressed by the Ministry of Family, Labor and Social Policy, the Central Bank and the All-Poland Confederation of Trade Unions (OPZZ).
Credit Inquiry #Nasht:
NBP: Wspieranie popytu może odziaływać na wzrost cen
MF: Može Dopložić de Něuspoum. We provide funds. Rumors. Withrostussen
MFiPR: Będzie prowadzić do wzrostu cen
OPZZ: Niekorzystnie wpłynie na kształtow.
MinRoz: Don't know about you🤡
— Piotr Sobolewski (@PiotrSobolewski) July 16, 2024
But Development Minister Kristof Pasik told broadcaster Tok FM that “the plan has sometimes been maliciously criticised with disingenuous claims that it will inflate house prices” and promised that “there will be no price increases” as a result of the plan.
He said the recent rise in house prices in Poland was due to inflation – which is higher in Poland than in most other European countries – and energy costs.
Minister Pasik's ministry will begin debating the bill in parliament after the summer recess and, if all goes well, the scheme will be launched in January next year, with the aim of running it until the end of 2027.
Passjik: nie będzie wzrostu cen mieszkań w efekcie kredytu #nastart#PAPInformationhttps://t.co/rT3555RDgN
— PAP (@PAPinformacje) July 17, 2024
Main image credit: Maciej Drążkiewicz/Unsplash
Alicja Ptak is a senior editor at Notes from Poland and a multimedia journalist, previously working for Reuters.