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
Long-term rental only for a year?
21 November 2018
Maximilian Mendel, Ph.D., MRICS
Demand on the primary market is high but the developers are finding it difficult to keep up. They are trying to start new projects and offer what the buyers expect. One of the most important groups of customers that they tailored their offer to are homebuyers looking for one and two-bedroom units. What about families, who need larger dwellings? Do they have a lot to choose from? Are they likely to receive special treatment? Do they actually go for large flats?
Demand on the primary residential market remains high. The results of REAS monitoring in the 6 biggest cities in Poland with the largest markets show that in Q1 2018 the number of offered dwellings dropped quarter on quarter on every market. The only exceptions were Poznań (+5%) and the Tri-City (+1.5%). Despite the difficulties in acquiring new land for their projects and the problems associated with the shortage of workers in the construction industry, the developers are trying to start new projects and offer what the buyers expect.
One of the groups generating the most demand are investors buying rental properties. They are mainly interested in small one and two-bedroom units. What about families? As the condition of the economy stabilised, salaries increased and people started looking for options to improve their housing conditions, has demand for large dwellings also increased?
As the past few years have shown, developers are pretty good at identifying the needs of homebuyers. Although the supply of 4-bedroom or larger units in the cities monitored by REAS on a quarterly basis does not exceed a dozen or so per cent, their share in the offer is gradually increasing. Poznań is an exception, where the already low share of large units is constantly decreasing. It is important to note that the size of the largest units in multi-family buildings from the popular segment ranges between 75 and 90 sqm. Units offering over 100 sqm are rare.
The preferences of homebuyers are analysed by REAS on the basis of data obtained from OBIDO in Warsaw, Kraków and Wrocław. They offer the conclusion that demand for the largest flats (over 100 sqm) is still erratic and only in Warsaw exceeds 1%.
“The limited popularity of such flats results mainly from the fact that their total price is often outside the homebuyers’ budgets. Even if the price per sqm is relatively lower. Another reason is that people interested in buying a large home often decide to buy a detached or terraced house,” says Aleksandra Gałabuda, a REAS consultant. “Having analysed the data, we have also concluded that the customers interested in purchasing large and expensive flats prefer traditional sale methods, e.g. through agents, which is why data published on the websites may not fully reflect the situation on the market.”
Introducing large dwellings into the project mix is risky, to some extent, for the developers. The total price of such units makes them affordable for a much smaller group of buyers than in the case of 2 or 3-bedroom units, who are also much more demanding as far as the layout and functional solutions are concerned. To make the units more attractive and break the homebuyers’ reluctance to spend a considerable amount of money, the developers use a variety of techniques, e.g. choose specific locations for large units in the building. In the case of large buildings and large housing estates, the large units are usually located on top floors or on the ground floor, to ensure access to a garden or an attractive terrace/balcony. In the case of projects offering fewer units, the large ones are typically distributed evenly across storeys but usually offer an attractive view or its windows face a particular cardinal direction.
One can hardly expect the catalogue of incentives for the homebuyers interested in large units to include considerable discounts. “The customers try to negotiate the price regardless of the size of the unit they are buying. Although the total price is high, it is important to note that large units are typically relatively cheaper in terms of the price per sqm from the most popular 40–50 sqm flats. An exception is the small pool of luxurious apartments, where total prices and the price per sqm are much higher than the market average,” said Aleksandra Gałabuda, a REAS consultant from Market Analysis & Research. “In the current market conditions, the developers are unwilling to offer discounts of more than the typical 1 or 2%. Only when the projects are in the final stage of completion or once a use permit has been issued and a unit remains vacant, the outcome of negotiations can be more favourable for they buyer. However, the discount will not exceed 3–5%.”