How Cheap Mortgages Transformed Poland’s Real Estate Market
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Loading... - Sullivan Baiss
- 03 Feb 2025
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Real estate serves as a cornerstone of modern economies, acting as both a tangible asset and a vital component of wealth accumulation for individuals and investment portfolios. Fluctuations in real estate prices have significant implications, influencing consumer sentiment, financial stability, and overall economic health. Understanding the drivers behind these price dynamics is essential for policymakers, investors, and homeowners alike, particularly in the context of increasing housing affordability.
The Importance of Real Estate Prices in Policymaking
Given the critical role of real estate prices, governments often implement policies aimed at influencing this market to enhance housing affordability. Such initiatives can be evaluated using causal inference toolkits, allowing for a deeper understanding of their impact. In this article, we will assess the effects of Poland's mortgage subsidy program, specifically the Safe Credit 2% program, on real estate prices using a synthetic control group methodology.
Safe Credit 2% Program Overview
Launched in July 2023, the Safe Credit 2% program was designed to assist young people and families in purchasing their first apartments. The program's justification, as stated on the official government website, highlights the challenges many face in securing affordable housing amid rising real estate prices and increasing loan costs.
Key features of the program include:
i. Eligibility for individuals up to 45 years old who have never owned a flat.
ii. A maximum loan amount of 500,000 PLN for single applicants and 600,000 PLN for married couples or parents with children.
iii. Availability of subsidies for apartments on both primary and secondary markets.
Research Question and Methodology
Given that home developers cannot rapidly increase the supply of apartments, subsidy programs like Safe Credit 2% can significantly boost demand. This increase in demand, coupled with relatively stable supply, may lead to substantial rises in real estate prices.
The central research question is: Has the program increased real estate prices in Poland?
Assessing the program's impact is complex. A simple before-and-after comparison of Poland's real estate price index would be insufficient, as various external factors could influence the results. Additionally, the program's availability to all Polish residents complicates the evaluation, especially during a time marked by political and economic crises, including the influx of Ukrainian refugees and high inflation rates.
To address these challenges, we can utilize a synthetic control group method. This technique involves creating a synthetic control group that closely matches the characteristics of the treated group (in this case, Poland) to estimate the counterfactual outcome had the treatment not occurred.
Creating a Synthetic Control Group
The synthetic control group will be constructed using actual price trends from other EU countries. By analyzing these trends prior to the program's implementation, we can assign weights to each country, forming a linear combination that closely resembles Poland's characteristics.
Once the synthetic control group is established, we can compare the actual real estate prices observed in Poland after the program's launch to those in the synthetic control group. This comparison will provide insights into what would have happened to real estate prices in Poland had the Safe Credit 2% program not been introduced.
Analyzing House Price Trends in Poland
Examining the house price index in Poland reveals a striking increase over the past eight years. However, our primary focus is on the most recent data point in this series, which complicates the long-term analysis of the program's effects but remains feasible.
The introduction of the Safe Credit 2% program represents a significant intervention in Poland's real estate market, aimed at enhancing housing affordability for young people and families. By employing a synthetic control group methodology, we can better understand the program's impact on real estate prices, providing valuable insights for policymakers and stakeholders in the housing sector. As we delve deeper into the data, the findings will shed light on the effectiveness of such subsidy programs in shaping the dynamics of the real estate market in Poland.
