Economic news

• DATA: The October data for the Polish economy delivered a significant upside surprise. Industrial production rose by 3.2% yoy versus the expected 2.4% (detailed commentary here), construction and assembly output increased by 4.1% yoy against the consensus forecast of 1%, and enterprise-sector wages decelerated markedly below expectations (7.3% yoy) to 6.6% yoy (detailed commentary here). In our view, this set of figures decisively tilts the balance toward an NBP Monetary Policy Council rate cut in December.
• INFLATION: Core inflation excluding food and energy prices stood at 3.0% yoy in October, compared with 3.2% a month earlier, and amounted to 0.1% mom versus 0.2% previously, according to the National Bank of Poland. Following Statistics Poland’s headline inflation release, the consensus had expected a slightly lower core inflation reading (2.9%).
• INTEREST RATES: Two MPC members hit the wires last week. Wiesław Janczyk left the door open for another “adjustment” (i.e. rate cut) in December. Ludwik Kotecki advocated for caution, though. While Kotecki sees space for further two 25 bps cuts within 4-5 month time frame, he would prefer the Council waited a couple of months to get accurate and timely information regarding the behavior of inflation at the beginning of the year.
• BUDGET: According to the Ministry of Finance, the state budget run a PLN 227 bn deficit in the first 10 months of the year. This constitutes 79% of this year’s target. On a 12-month rolling basis the deficit remained above the target, though, implying that the Ministry would undertake some measures in the final weeks of the year to avoid a budgetary amendment. Revenue data for October were decent.
• SENTIMENT: Both business and consumer sentiment improved in November, according to fresh data published by Statistics Poland. The weighted average of industry-level business sentiment indicators rose to a new 4-year high, while consumer sentiment rose marginally (remaining at relatively strong levels). However, there were conflicting signals in consumer sentiment data. On one hand, current major purchases rose to a new cyclical high. On the other hand, consumers turned more nervous about the state of the labor market. All in all, this supports our expectations of an acceleration in economic growth in 25’H2 and next year.
• HOUSING: The NBP released fresh data on residential housing prices. Most importantly, the data show a decline in nominal prices. For us, this is an opportunity to revisit our forecasts – see the next section for details.
• DEBT: Last Friday the Ministry of Finance conducted yet another solid bond sale. This auction attracted considerable demand (PLN 15 bn) and allowed the MoF to sell PLN 10 bn of government bonds. Notably, this was the first time the MoF sold PLN 1.5 bn worth of NZ0928-series bonds linked to the new PLN interbank benchmark rate (POLSTR).

The Polish housing market catches its breath for a moment

What is the current situation on the Polish real estate market? Last week, the National Bank of Poland (NBP) published market price data for the third quarter of 2025. They indicate a significant stabilization in housing prices - both on the primary and secondary markets - that has been observed for several quarters. In the seven largest Polish cities, prices declined by 0.7% quarter-on-quarter in both market segments. The average transaction price has reached a plateau - since the third quarter of 2024, the price per square meter has remained around PLN 14.3k on the primary market and around PLN 13.5k on the secondary market.

Average housing transaction prices (7 largest cities, PLN k/square meter)

Source: NBP, Pekao Research

The slowdown in price growth in recent quarters was fueled by macroeconomic factors: delayed effects of high real interest rates (positive only from 2024 onwards due to inflation falling faster than the NBP interest rates), high housing supply, expiration of the "2% Safe Credit" mortgage subsidy programme and a decline in inflation for industrial and construction goods, which reduced developers' costs. Furthermore, another mortgage subsidy programme was not ultimately introduced.

Going back in time, for our May 2024 real estate market report, we constructed a forecasting econometric model that aggregates information on the economic situation and its impact on real estate prices. The model forecasts price levels using macroeconomic variables that drive both demand and supply. In November 2024, we presented a forecast assuming slight price declines (the average transaction price on the primary market for the seven largest markets in Poland) starting from the second quarter of 2025. The annual price growth rate was expected to gradually decline, and given the very high base effect, even pushing it below zero by the end of 2025. Seeing current situation in the Polish real estate market, we are satisfied with the accuracy of our scenario. However, instead of a clear peak, a plateau has emerged, but with significantly declining price growth year-on-year.

Today, we re-estimate the model, extending our forecast to 2026. Considering our assumptions regarding the macroeconomic situation in Poland, we believe that housing prices have the potential to decline further until the first quarter of 2026, when the average price (transaction price on the primary market for the seven largest cities) should fall below PLN 14k per square meter, over 2% lower than current levels. However, we forecast that housing prices will begin to rise again from the second quarter of 2026.

Housing prices on the primary market (7 largest cities) + our forecast

Source: NBP, Pekao Research

The key here will be growing demand driven by the improving economic situation, as well as the accumulating delayed effects of this year's interest rate cuts. Lower rates will improve households' creditworthiness, boost confidence and increase interest in mortgages. The monthly number of mortgages granted already exceeds 20k, approaching the levels of the credit booms of 2021 and 2023. Buyers will also be more confident that prices may start to rise again as financing availability improves. Moreover, we still expect further NBP rate cuts.

Demand for housing loans

Source: Credit Information Bureau, Pekao Research

Financial Market Update

On Friday, EUR-PLN strengthened quite dynamically and temporarily exceeded even 4.25. However, it did not maintain its gains and closed the week slightly below the technical level of 4.24. Nevertheless, this was a positive note for the Polish currency, which promises further appreciation this week. The upward trend is even more visible against the dollar. USD/PLN moved from 3.65 to 3.68 last week, and this morning saw a continuation of the correction that began on Friday to 3.67.  Not much happened on the bond market, with Polish Treasury bond yields falling slightly in line with the core markets. However, the upcoming auction (on Wednesday) may bring some volatility to the debt market.