The Polish government wants to ease the burden of homeownership for first-time buyers while making it more difficult for investors to monopolize the market and jack up prices.

Poland recently enacted measures to exempt first-time homebuyers from paying a 2% transaction tax when purchasing property. In practice, this could save homebuyers thousands of dollars on their first home.

The only minor caveat is that the tax exemption applies to existing properties and not to new builds.

In addition, the government will soon impose a new 6% transaction tax on investors who buy six or more properties in the same development.

The new measures attempt to rebalance Poland’s housing market by incentivizing younger people to buy their first homes. It’s also a slap on the wrist (and a money grab) for investors who buy multiple properties and flip them for profit.

If all goes according to plan, the program could help alleviate a huge problem currently plaguing Poland’s housing market.

Poland’s property ghost towns

Poland’s housing shortage has been described as “severe” by Habitat for Humanity. The Polish government, too, has complained about inadequate dwelling availability because of refugee spillover from the war in Ukraine.

Despite all the complaining about a housing shortage, a staggering 1.8 million units went uninhabited last year, according to Polish census data.

That’s nearly 12% of the country’s entire housing supply.

In Warsaw alone, 207,000 dwellings, or a fifth of all homes in the city, sat empty.

It’s difficult to pinpoint exactly why so many homes are uninhabited because the government’s census data lists several potential reasons.

Abandoned houses, run-down apartments, summer homes, investment properties—all are listed as reasons why homes are uninhabited.

Whatever the reasons—and there are plenty—shortages have contributed to a steep rise in property values in recent years.

Big Four accounting firm PwC estimates that Polish apartment prices surged 10% annually between 2017-2020, forcing more families into overcrowded rentals.

Rising rents and property values have made a difficult situation even worse. Poland already ranks at the bottom of the EU in terms of the number of rooms per person—1.1 rooms per person compared with the EU average of 1.6.

On the supply side, help doesn’t appear to be imminent.

The burden of rising interest rates

Poland’s new tax exemptions wouldn’t have meant much without another crucial piece of legislation that was passed in July.

The country recently implemented its First Home program, enabling first-time buyers to lock in at a 2% mortgage rate for ten years. Mortgage rates on the open market are 8-9%.

Real estate experts said Poland’s housing market was all but “frozen” as buyers waited for the bill to pass. But now that it’s here, nobody knows exactly how it’ll play out.

Even if the program succeeds, homebuilders will likely respond by raising prices, according to Angelika Klis, a board member Atal SA, Poland’s second-largest homebuilder.

“The program allowed many clients that were blocked from taking mortgages at high interest rates to get financing,” Klis told Bloomberg. “If the [housing market’s] revival continues, developers will react by raising prices.”

Millions of Poles do not have access to this program or the recently announced tax exemptions because they aren’t first-time buyers. For many, the only way they can afford to buy a property is to wait for mortgage rates to drop.

This is the same predicament that millions across the G7 find themselves in after their central banks raised interest rates to fight inflation.

With U.S. home prices at record highs and mortgage rates hitting 23-year highs, can similar legislations make it across the pond?