Equity Release in Poland and Europe: Forecast for 2023
Robert Majkowski, CEO and Co-Founder of Fundusz Hipoteczny DOM S.A. which is the pioneer and largest home reversion provider in Poland, shares his views on prospects for equity release for the year ahead.
In 2023, financing for entities offering Equity Release in the European Union will take off. This will be achieved, firstly, through access to long-term and tailored funding for equity release providers in the European Union. Secondly, there will be a better and more diverse portfolio of equity release solutions. Thirdly, the possibility of higher one-off, lump-sum payments will help the elderly pay off liabilities and debts – including those that arose due to the pandemic, the war in Ukraine, and rampant inflation. Fourthly, there will be greater cooperation between European countries, not only in the field of education but also in terms of financial security of pensioners. Fifthly, it will provide support for the younger generation, even though the equity release is aimed at the elderly. So what changes will take place in the Polish and European markets in 2023? The most important of these changes are highlighted below.
Demographic and economic prooblems are being faced not only in Poland but across Europe. Equity release has already become the answer to some of them. What will happen in 2023?
Long-term funding and a better offer
In 2023, a new platform which aims to fund the subsequent and long-term development of the equity release market in the European Union will start operating. Service providers will have access to long-term, tailored financing, leading to an improved offer to be addressed to customers. Fundusz Hipoteczny DOM will be responsible for developing the equity release market under this project in Poland.
It is worth quoting data from a report prepared by Ernst & Young (EY) and the European Pensions and Property Asset Release Group (EPPARG). According to EY and EPPARG forecasts, the global equity release market is predicted to grow threefold by 2031. In 10 years, the annual volume in the United States will exceed USD 25 billion, which means that Americans will sell (in one year only) equity release of this value. In Great Britain, this volume will amount to USD 13 billion a year; in Italy USD 6-10 billion; in Canada USD 3-4 billion; and in Poland about USD 0.6 billion. The platform will start operating in 2023, only accelerating this development.
It is worth emphasizing that the financing being discussed is based on the British model. Thanks to the funding, the industry in the UK has been developing safely and dynamically. The UK market is already mature and regulated, with existing ethical standards. Moreover, the service is well regarded by consumers, as well as decision-makers, politicians and economists. Its positive impact, not only on the situation of people of retirement age but also on the entire economy, is appreciated. This success in the British market is reflected by the number of new clients, which in the previous year reached almost 50,000. British solutions are certainly worth transplanting to other markets, and this is what is happening.
Larger lump-sum payments
Thanks to access to long-term financing, home reversion – one of the types of equity release – will develop more dynamically, and the offer will become more diverse. At the beginning of the year, we intend to introduce, among other things, larger one-off payments. This is a solution that we have been testing for some time, and it is a response to the needs of the elderly. In Poland, the lack of funding limited the level of one-off payments. Inflation and rising prices have strained pensioners’ budgets drastically. It has become even more costly to heat and maintain unrenovated properties. Retirees often need a cash injection already at the contract date. Later, of course, they receive standard monthly payments. It should be noted that current pensioners, meaning people aged 60+, who took out mortgage loans for the purchase of real estate years ago, are currently in the final stage of their repayment. One-off payments can help them pay off the remaining part of the mortgage, especially since rising interest rates have increased loan instalments.
Greater cooperation between European countries
The changing demographic and economic situation and the dynamic development of the equity release market across Europe will strengthen cooperation between European countries. Among other topics, long-term education of the elderly will be needed to guarantee them complete and reliable knowledge about the service and regulations. This is vital, not only in the context of equity release, but also other financial instruments that could improve the economic situation of pensioners.
Financial support for young people
The macroeconomic situation has led to a rapid decline in the creditworthiness of young people. In September 2022 in Poland, the number of housing loans fell by 70.6 per cent, compared to the previous year, while their value was 71.3 per cent lower than a year ago . In addition, according to the report of the National Bank of Poland entitled “Situation on the credit market” in the fourth quarter, banks were expected to continue to tighten their lending policy relating to entrepreneurs and households . Seniors who own real estate and decide to proceed with a home reversion will be able to support their children and grandchildren financially, as well as contribute to the purchase of a flat for young people, thanks to a larger one-off payment.
 Report “Global Equity Release Roundtable 2020”, prepared by EY and EPPARG, published on January 28, 2021.