Until autumn 2021, Polish borrowers enjoyed record low interest rates, with the National Bank of Poland’s base rate standing at just 0.1%. It had been cut several times by the Monetary Policy Council in an effort to stimulate the economy during the pandemic. However, in the fall of 2021, in response to rapidly rising inflation, the central bank began a series of sharp interest rate hikes. From October 2021 to September 2022, they rose to 6.75%, causing mortgage payments to increase by more than 100% in many cases. The NBP base rate remained at a record high until September 2023, when, after many months of keeping rates at fixed levels, the Monetary Policy Council decided to lower them to 6%. Then, following a cut in the following month, to stabilize at 5.75% for the preceding months. On May 7, 2025, the Monetary Policy Council (RPP) decided to lower interest rates by 0.5 percentage points, bringing the reference rate to its lowest level since May 2022, at 5.25%. Will this, together with the announced introduction of a government program to support home purchases, reverse the negative trends in the housing market?
The results of the housing market monitoring conducted by the PAB-PCR&F Institute indicate that the housing construction results in 2024 were the worst in over 5 years, being 20% lower than the 5-year average.
“Sharp drop in housing completions follows mortgage rate hike.”
The main cause of the downturn in the housing market in 2023 and 2024 was the sharp rise in mortgage interest rates and the decline in the ability of those in need to take out loans.
Government support programs, which in 2021 and 2022 had a positive effect in the form of an increase in the number of completed flats, also had negative effects, leading to speculative growth in housing by developers. This was reflected in 2023 and 2024 in a decline in financial capacity to purchase them and a freeze in demand. An additional cause of this impasse in the residential construction market was the emergence of a significant oversupply of developer-built flats on the residential real estate market.
The expiry of “the Safe Credit 2%” program at the end of 2023 significantly reduced demand for multifamily developer flats, despite a significant increase in average wages in the economy.
The lack of a government program led to market stabilization and minor price adjustments. The “Safe Credit 2%” led to a rapid depletion of offers on the market and a sharp increase in prices.
At the end of 2024, a significant freeze in demand for housing led to a stabilization of construction costs. This was reflected in a slowdown in the growth of nominal and real housing prices. Transaction rates for renting square meters of residential space stabilized or declined slightly.
In the second half of 2024, in the absence of a support program for buyers and further interest rate cuts, the housing market was frozen, a situation that continued at the beginning of 2025.
Experts point to the high level of interest rates as the main reason for low sales, which means not only expensive instalments, but above all problems with creditworthiness. The annual dynamics of housing loans in Q4 2024 decreased to 4.5% y/y (from 5.2% y/y in Q3 2024), which was related, among others, to the termination of granting loans under “the Safe Credit 2%” program in previous quarters. Waiting for new subsidy proposals postpones the purchase of a flat for first-time buyers.
Some hopes for a revival in the housing market were raised by the announcement of the launch of a new government program, “Key to the Flat”. The market research suggests that the rate cut will likely be a bigger boost than the new housing support program. The program’s provisions, which include price thresholds and other limits, mean that only some buyers will be able to qualify for the subsidy.
The announcement by the Ministry of Development and Technology of a new housing program called “Key to the Flat” caused quite a stir in the credit and real estate markets. Some customers decided to put their transactions on hold, hoping for new opportunities to get help buying their first home. Currently, the “Key to the Flat” program raises more questions than answers. The final shape of the regulations will decide whether this program will become a truly effective tool to support buyers, or just another concept with no real impact on the housing market.
On the other hand, the omission of the property development market from the program may have negative consequences, such as a reduction in the number of new investments, especially in affordable housing. Developers are already facing challenges such as an increase in the number of cancellations of flat purchases and longer sales times, which particularly affects the economy segment. Some customers are leaning towards renting, which increases demand in this sector.
On May 7, 2025, the Monetary Policy Council (RPP) decided to lower interest rates by 0.5 percentage points to 5.25%. On the one hand, this decision will reduce the burden on current borrowers, and on the other, it will open the door to financing real estate purchases for people who previously did not have sufficient creditworthiness.
Improved financing opportunities for housing construction, combined with slowing inflation, resulting in lower mortgage rates and some improvement in the ability to invest in housing, will halt the downward trends in the housing market in 2025.
Real estate analysts agree that drastic price changes should not be expected in the coming months. The situation seems to be stabilizing, and the current corrections are the result of natural market mechanisms.
The answer to the question in the title, when the deadlock in the new residential construction market will be broken, depends on:
- The pace of implementation of announced government programs supporting the housing market.
- The direction and scale of adjustments to banks’ lending policies.
- Changes in buyer preferences following the experiences of recent years.
- The development of the rental market as an alternative to homeownership.
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