P1: How will the amendment to the developer act affect the Polish housing market?

Part 1:
What changes must developers and buyers be prepared for? What changes must developers and buyers be prepared for? Will the regulations introduced from July this year translate into an increase in apartment prices?

Tomasz Kaleta, director of the Sales Department of Develia S.A.:
In many respects, the new developer act puts in order the issues that were omitted in the current draft, e.g. the subject of the reservation agreement or the sale of parking spaces. Additionally, there will be a number of new entries. For apartment buyers, one of the consequences of the entry into force of this amendment will be the creation of a Development Guarantee Fund, which will involve the necessity to pay a premium of up to 1%. the value of the apartment. This requirement will increase the final price of the premises by up to several thousand zlotys. In the face of double-digit inflation, increases in interest rates and increases in the prices of building materials, the introduction of the DGF is, in my opinion, only an additional, unnecessary price factor.

Zuzanna Dobra, Commercial Director at Eco Classic:
As the reason for the amendment to the Act, UOKiK stated that since 2012, since the entry into force of the first act, 150 bankruptcies of development companies have been recorded, while the data concerned construction companies. According to PZFD, 3 development companies declared bankruptcy since 2012. This proves that the first act served its purpose, so the reason for the amendment seems to be different.

The new act introduces a contribution to the Development Guarantee Fund, which in the event of the developer's bankruptcy is to protect the client's funds and this is perfectly justified, but after the developer has fulfilled the contract, the premium is not refunded. It can therefore be assumed that the real purpose of the amendment to the act was to introduce a new tax, which will be paid by buyers at the end of the day in the price of a flat. The amendment also significantly increases bureaucracy, which will translate into an increase in the workload on the part of developers and banks, which will again be included in the price of the product, i.e. apartments.

Zbigniew Juroszek, President of the Management Board of Atal S.A.:
The regulations will certainly translate into an increase in prices, as changes in the law directly affect the costs of investment and construction.

Arkadiusz Król, attorney-at-law, director of the legal department, member of the supervisory board of Lokum Deweloper S.A.:
Developers are used to the fact that the high dynamics of Polish legislation has a noticeable impact on their functioning, and the effects of this are not always visible to our clients. This is because some of the changes affect the broadly understood operational activity of developers. The amendment to the developer act has increased its volume and will certainly find a wider scope of application than its current version. The main part of the act will come into force in the second half of the year and will bring, inter alia, obligation to pay contributions to the Development Guarantee Fund, which at the expense of developers' funds or de facto their clients will act as a kind of financial cushion for apartment buyers in the event of crisis situations. Certainly, this change will have an impact on the final cost of manufacturing or purchasing the premises. Subsequent provisions relate primarily to the greater formalization of the reservation agreement. The fee paid at its conclusion will be limited to 1%. the value of the premises, and its return will be obligatory, for example in the event of a bank's negative decision to grant a loan to the customer. It should also be mentioned about a significant change in the conditions for considering complaints. I am afraid that on this level a lot of ambiguities may arise between the developer and the buyer in the future. The new developer act extends the information prospectus as well as changes the procedure for handing over the premises. It is worth remembering that not all transactions concluded after 30 June will be covered by the regime of the new law. Developers and their clients have time to get used to the new reality, because, as a rule, only investments launched for sale after this date will be covered by the new requirements.

Adrian Potoczek, development director at Wawel Service:
From 1 July this year. a new developer law will enter into force. The new regulations will apply to developers and other entities related to the functioning of the market, including banks. The biggest change will be the establishment of the Development Guarantee Fund. This means that developers will be required to pay an additional premium, which is to guarantee buyers greater security. However, this does not change anything for our clients, who never had to worry about the completion of the investment, because we always built housing estates with our own funds and established escrow accounts.

Cezary Grabowski, sales and marketing director of Bouygues Immobilier Polska:
The amendment will not revolutionize the market or the industry. Rather, it is a modification of the provisions, supplements them and clarifies them, primarily in terms of additional security measures buyers' financial contributions. For the functioning of the market as a whole, such arrangement of procedures should have a positive effect. These changes should not have a significant impact on prices.

Joanna Janowicz, managing director at Constructa Plus:
The estimates of experts who assessed the impact of the amendment on housing prices, in particular the costs of introducing the Development Guarantee Fund, indicate an increase of 3-5%. We are currently witnessing a series of interest rate increases that have translated into the cost of loans that developers use to finance their investments. The war following the Russian aggression against Ukraine has broken supply chains for such key materials for the industry as concrete, steel and wood. In addition, there is also the price pressure related to the rapidly shrinking rental housing market. All this means that the initially innocent-looking 3-5%, as part of a greater accumulation of phenomena translating into strong price increases, may significantly reduce demand, and so much limited by a drastic reduction in the creditworthiness of Poles. Therefore, the industry should put pressure on the government and parliament to postpone the entry into force of the amendment to the developer law. While the rulers have no influence on the global markets for raw materials and construction materials, the date of entry into force of the new regulations is their responsibility and in this respect they could limit negative market trends.

Janusz Miller, Sales and Marketing Director of Home Invest:
The amendment to the developer act will probably have its pros and cons. Generally, it is to introduce a number of changes to some of the solutions of the provisions in force so far, as well as to clarify or supplement them. The main goal is to increase the protection of buyers in the relationship with the developer. Undoubtedly, one of the most important changes is the introduction of the Developer Guarantee Fund, which is to protect the client in the event of the developer's problems, but also against the bankruptcy of the bank keeping the escrow account. On the other hand, the payment of premiums by developers will involve additional costs, and this may translate into an increase in apartment prices.

Mariola Żak, sales and marketing director at Aurec Home:
The developer law, which comes into force on July 1 this year, will introduce a lot of changes to the real estate market and will affect its condition. The biggest change to these regulations will be the establishment of the Development Guarantee Fund. Developers will be required to pay an additional premium calculated on the gross price of the premises. In other words, also on VAT and other charges of up to 1%. the value of the apartment. These changes are intended to increase the protection of buyers of premises and act as a financial cushion in the event of a crisis. The new developer act also introduces other changes, including It also extends its application to reservation agreements and defines their basic terms and conditions, as well as changes the rules for withdrawing funds from escrow accounts, or modifies the procedure for handing over the premises. As you can see, this is a series of new obligations imposed on developers, which will face an increase in the costs of doing business, which in turn translate into an increase in apartment prices.

Teresa Witkowska, Napollo Residential Sales and Marketing Director:
Unfortunately, the act will primarily affect the rise in apartment prices. In the Development Guarantee Fund, each developer will have to include additional money towards new investments. In addition, the change in customer payment schedules will directly translate into financial liquidity of development companies. This one will have to be bigger, which means more expensive flats. Of course, it will be up to the developers to set reasonable price limits. Our goal is to attract customers, not scare them away, which is why active activities in the area of ​​the offer and customer service are what counts in order to finally encourage the purchase of real estate.

Source: The survey was developed by the real estate website dompress.pl