Despite a drop in residential sales, the market remains in a state of equilibrium
25 July 2019
Developers still doing well
25 April 2019
Kazimierz Kirejczyk, FRICS
Łódź: the shining star of the development market in 2018
6 February 2019
The housing market in 2018: a thriller with a happy ending
22 January 2019
Summary of 2018 on the primary residential market
31 December 2018
Kazimierz Kirejczyk, FRICS
For developers, 2017 was a period of prosperity. The number of new dwellings sold in the 6 largest cities in Poland was 72,700, which is an increase of more than 17% on the record to date, of 2016. This would not have been possible had the sales not gone hand in hand with the release of 67,300 new units. The end-of-year result also confirmed this upward price trend. The coming year should not be noticeably worse for the sector, although it would be wise to prepare for changes – according to the latest report released by the consulting company REAS, "The Residential Market in Poland – Q4 2017".
In sales terms, Q4 2017 was the crowning moment of the year. From October until December in Warsaw, Krakow, Wrocław, the Tri-city, Poznań and Łódź, a total of 18,900 flats were sold, breaking the previous record of Q1 2017. Warsaw is the consistent leader, with sales for the quarter of 7,500 and 28,500 for the year, showing that one in five flats from developers in Poland were sold in the capital last year.
Interestingly, each of the markets reviewed achieved some kind of record of its own at the end of the year. The most spectacular growth in sales (by more than 36%) and supply (by more than 50%) was seen in Łódź. The highest rise in average prices of flats on offer, which was recorded at the end of December, occurred in the Tri-city, where the price per square metre for a flat was more than 12% higher year on year (PLN 7981 compared to PLN 6960).
In Poznań, the ratio of sales under the "Home for the Young" scheme to total sales for the year on a particular market was the highest (as much as 25 %). Wrocław was the only city of the 6 major cities to see a rise in the number of flats on offer at the end of December. In Krakow on the other hand, the developers' most serious problem was new launches on the market. Here, supply was considerably below demand for three continuous quarters, noting a 9% fall over the entire year, while there was a 16% increase in the number of transactions. It was in Krakow that the trend that developers will face in the coming months first emerged.
Kazimierz Kirejczyk, President of the Board at REAS observes that the tendency for "supply to fall behind demand" is one of the most important changes seen at the end of the year. – The continuing optimism on the part of buyers due to the strength of the economy, which has led to higher pay and increased savings, and availability of mortgages, and which has rendered investment in property rental attractive, is starting to come up against the growing problem of finding attractive locations for investments, increasing land prices, and prolonged bureaucratic processes. All of this combined means that developers are finding it increasingly difficult to put on offer new investments which can meet the high expectations of buyers.
Another challenge facing developers in the near future is the increasing cost of production. – Even right now, the costs of realising an investment are changing rapidly, and this is raising doubts as to whether investments can be finalised according to the agreed contractual conditions. Finding contractors to handle new projects brings with it considerable problems, and this will probably not be easier or cheaper, because a number of years of work on major infrastructure investments await us. – Kazimierz Kirejczyk says.
Developers will also have to manage without the "Home for the Young" scheme. The fact that the funds in the latest tranche for 2018 were distributed in a mere 38 hours from the moment applications began to be accepted might indicate the scale of interest among buyers in government funding. At the same time, the fact that the scheme presents an opportunity to obtain funding was only one of the ways in which the scheme affected the situation on the housing market. The hampering effect it had on the increase of prices in the lowest market segment was equally as important. In fact, this was reflected in the rise in prices of newly released units even as early as Q3, when it became clear that this group of buyers was becoming less important within the overall buyer group.
- Despite the inevitable slowdown that comes from the cyclical nature of the market, the property development sector has not found itself facing the prospect of a crisis. Any fall that might occur in the volume of transactions, which is something that could be expected in the years to come, will not mean a return to the level of the years 2008-2009 – Kazimierz Kirejczyk points out. – The market has matured. Developers are more flexible when it comes to adapting to changes in their situation. The level and the rate of sales is so high that even a substantial slowdown should not pose a threat to the operations of firms which are handling a number of projects in various locations and market segments at the same time. The greatest doubt centres around the impact that proposed legislative changes will have on market mechanisms, as this will depend on the vacatio legis timeframes and the specifics of the new legislation - the REAS expert adds.
 For the purpose of REAS calculations sales in the 6 largest cities are assumed to be 56% of the total sales on the primary market in the whole of Poland.