Page 15 - Poland Outlook 2022

4.5 Construction

Poland’s construction sector, which appeared to be cooling in September and
October, sported a surprise rebound in November, complicating the outlook for
2022 somewhat. Still, the year looks challenging for construction companies
and real estate developers.

They will have to deal with limited supply of land, more expensive raw
materials and interrupted supply chains. That will affect housing prices unless
companies agree to cut their margins – which may be the case, some analysts
say.

It seems more likely that construction works will be postponed to wait out the
period of increased costs.

An additional burden is the increase in interest rates, which means difficulties
in the repayment of mortgage installments for private owners, but also an
increase in interest rates on development loans. Regulatory factors influencing
the increase in risk in the real estate industry is the financial market watchdog
KNF’s amended Recommendation S, effective from July 2021, which tightened
the criteria for calculating creditworthiness for long-term loans.

Despite the challenges, real estate development activity should remain high,
especially if development companies do learn to live with lower margins. On
the demand side, however, the higher cost of credit – the central bank interest
rate is going to go up to 2.25% from just 0.1 as recently as in September –
could deter buyers from the second quarter on. In Q1, demand is expected to
remain robust if only due to inertia related to the length of the home buying
process. What may fuel purchases is real estate being seen as a way of
hedging against persistently high inflation throughout 2022.

5.0 Fiscal policy outlook

In the budget bill adopted by the Polish parliament in December, the
government assumed revenue of PLN491.9bn (€108.3bn) and expenditure of
PLN521.8bn, thus leaving a modest deficit of PLN29.9bn.

Budget revenue will grow 1.8% in 2022 while expenditure is projected to
remain virtually the same, falling 0.2%. The deficit will be clearly smaller than
last year when it came in at PLN40bn.

The budget bill is quite likely to be updated considerably as it was built on
assumptions that are no longer valid. While the government’s projection of
economic growth in 2022 appears reflective of the reality, inflation averaging
just 3.3% does not, analysts point out. Also Poland is entering 2022 amidst a
major monetary tightening after four hikes to the central bank’s reference
interest rate that increased it from 0.1% to 2.25%, with more to come.

15 Poland Outlook 2022 www.intellinews.com