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
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6 February 2019
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22 January 2019
Summary of 2018 on the primary residential market
31 December 2018
Kazimierz Kirejczyk, FRICS
Looking at the figures from the perspective of developers, it would seem that it lacks nothing. Only several years ago, Wrocław competed with Tricity to be the third housing market in Poland. At the moment, it ranks third both in terms of offer volume on the primary market and the number of units sold, and its position does not seem to be threatened. Could we say that the development companies operating in the capital of Lower Silesia managed to perfectly read the demand and that no changes are necessary?
Already in 2013, the sales in Wrocław were high as for that market, reaching nearly 5,600 units.
In 2014, the sales exceeded 6,400 units (an increase of 15.7%). In 2015, nearly 8,100 units were sold. In 2016, it was already 10,300 units. This means that developers implementing their projects in the city managed to double their sales in just three years.
The first half of 2017 brought 5,700 units sold, portending another record.
What is the secret? Since mid-2015, developers have responded to the growing interest in the purchase of new units with more flexibility. The number of units launched for sale in Wrocław started to reach the highest values. The average number of units launched for sale per quarter from Q3 2015 to Q4 2016 reached approx. 2,500 units. It seems a giant leap if we realise that earlier the number remained at the level of 1,500 for over 4 years.
In H1 2017, developers launched for sale a record-high number of over 6,100 units and were rewarded with equally high sales.
Since mid-2014, the demand and the supply on the primary market in Wrocław have remained at similar levels with slight quarterly fluctuations. What is more, if we take into account the fact that the number of units on offer in mid-2017 corresponded to the sales recorded in approx. 3 quarters (an average calculated based on the sales in the last four quarters), we can see the scale of the surplus of the demand over the supply that we are dealing with. This indicator has been calculated by REAS for the market in Wrocław since Q1 2008 and the value that it reached in the first two quarters of this year is the lowest in the entire period (Q1 2017: 3.0 quarters; now: 3.1 quarters). By way of comparison, the highest value of this indicator was 8.5 quarters and it was recorded in Q2 2012.
With the increasing activity of developers, prices have also started to pick up slightly. After a period of stabilisation at the level of 6000 PLN/sq m, there has been a clear upwards trend since 2016. At the end of Q2 2017, the average price of units on offer was 6,338 PLN/sq m and was the highest since Q4 2011.
So is there something that the market in Wrocław AD 2017 may lack? Developers are selling more, at higher prices and faster than ever before. However, there is a small gap.
In REAS analyses, units in multifamily residential buildings are usually divided in two basic segments: flats and apartments. The flats are further divided into low-end subsegment units and lower-middle subsegment units. In the apartments segment, there are two subsegments: apartments and luxury apartments (unique on a national scale).
According to the results of the monitoring conducted by REAS in mid-2017, the apartment segment represented only 4% of the entire offer available on the primary market. Approx. 330 units offered in 17 developments were classified as apartments. Interestingly, in Q2, no developments were launched for sale that could be classified as such.
Does it mean that Wrocław does not need apartments? Or maybe the choice is too limited to satisfy the more sophisticated tastes of buyers. After all, unit prices in this segment are nearly twice as high as in the popular segment. The average price of apartments offered on the market in Wrocław in H1 2017 reached 12,000 PLN/sq m, while the average price of units from the flats segment was only slightly higher than 6,000 PLN/sq m at the same time.
One thing is certain. The primary market in Wrocław is recording impressive results and it seems that the year 2017 will not be any worse than the previous one. In this context, it is safe to say that the possible “gaps” are of no serious impact.