Recent comments

Despite a drop in residential sales, the market remains in a state of equilibrium
25 July 2019
Katarzyna Kuniewicz

Developers still doing well
25 April 2019
Kazimierz Kirejczyk, FRICS

Łódź: the shining star of the development market in 2018
6 February 2019
Agnieszka Mikulska

The housing market in 2018: a thriller with a happy ending
22 January 2019
Katarzyna Kuniewicz

Summary of 2018 on the primary residential market
31 December 2018
Kazimierz Kirejczyk, FRICS

The housing market in 2018: a thriller with a happy ending

22 January 2019

64,800 flats sold and 65,700 units launched for sale – these are the figures the developers operating in the six largest cities in Poland ended 2018 with. Although the volume of transactions dropped by 11% year-on-year, their total value was lower by only 4%.This was the second best year in the history of the real estate sector, sums up the latest ‘Residential market in Poland – Q4 2018’ report by REAS | JLL Residential Advisory.

The nearly record high[1] number of new units, following three quarters of a strong downward trend, and exceptionally good sales towards the end of the period, mark the end of the year that even the developers themselves could not have hoped for. The 19,300 flats launched for sale in Q4 2018 (up by 25% q/q) allowed developers operating on the 6 largest markets in Poland to expand their offer and make it more attractive, prompting a nearly 16% increase (q/q) in the number of transactions (16,500 on 6 markets). As a result, developers operating in Warsaw, Krakow, Wrocław, the Tricity, Poznan and Lodz closed they year with 64,800 sold units, the second best result in the sector's history.

Developers executing their projects in Warsaw contributed the most, having added nearly 9,000 new units to their offer between October and December, up by 66% q/q and 37% y/y. However, this was not enough to beat the 2017 record. In an annual perspective, the fastest growth rate was recorded in Poznan, where 6,400 new premises were released onto the market, up by 66% compared to 2017.

Higher supply, however, did not cause the prices to stop increasing, as they reached the 2007–2008 levels. This was mainly due to the limited availability of investment land and its increasing prices, issues with finding contractors in view of the shortage of labour, and a sharp rise in the cost of construction materials, absence of the impact of the Home of the Young scheme that hampered price growth in the low-end market segment and, finally, a change in the offer structure, where many more units in the lower-middle and high-end segments were added.

Prices grew at an annual average rate of 11% on the 6 markets in question, or even more rapidly on some of them. In Warsaw, the average price of 1 metre square of a flat on offer at the end of December 2018 was 13.3% higher than a year ago. Double-digit increases were also recorded in Krakow (12.6%), Wrocław (11.9%) and the Tricity (11%).
According to Kazimierz Kirejczyk, the chief expert of REAS | JLL Residential Advisory, we may expect the prices to continue increasing. “Although the price growth dynamics weakened in view of the gradually stabilising situation on the construction market, we have not yet reached the turning point. The market will not get there until supply starts outweighing demand, and the prices-to-salaries ratio deteriorates even further.Higher interest rates will also have a key impact on demand” comments Kazimierz Kirejczyk, Vice President of the Management Board of JLL.

However, there are still plenty of people willing to buy a flat of their own. Demand was sustained thanks to the significant expansion in mortgage lending.  The annual transaction volume recorded in the 6 markets that REAS | JLL Residential Advisory monitors on a regular basis was only 11% lower than that in 2017. It is also noteworthy that for Poznan and Lodz, that have so far trailed behind, this was the best year in terms of sales ever.

A more limited choice and rapidly rising prices had to dampen the enthusiasm of some of the buyers. This does not mean, however, that demand has disappeared entirely. For certain groups, purchase has actually become impossible, as without support from the Home for the Young scheme, the least affluent are no longer creditworthy enough.Those who bought flats as investments decided to wait with subsequent investments or started looking for opportunities in markets where the relation between rents and the prices of flats was still attractive. This is how the markets in Lodz and Katowice gained momentum,” comments Katarzyna Kuniewicz, Head of Residential Research at REAS | JLL Residential Advisory.

In the expert’s opinion, in the coming months and years the already large and still growing group of quite affluent buyers will play a key role as the most important and stable group of buyers on the primary market. Their motivation behind making purchases is improving their housing conditions or making a long-term investment. It is this group that the developers targeted with a significant part of their offer last year. Although in 2019 we should expect sales to drop slightly, as long as interest rates remain low and alternative investment opportunities do not emerge on the market, one can expect stable transaction volumes, where purchases are financed not only with mortgage loans but also paid for in cash, and made either to satisfy individual housing needs or for rent.

More details on residential markets of individual cities you can find in our brand new report: "Residential Market in Poland - Q42018"

[1] The record-breaking result of 19,800 new units released onto the market in a single quarter was recorded in Q4 2017.