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The Warsaw Voice » Real Estate » July 30, 2008
Interview
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Interesting Times Ahead
July 30, 2008   
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Waldemar Oleksiak, head of the Research and Analysis Department at Emmerson SA, talks to Agnieszka Domańska.

What is the situation in Poland in terms of apartments available?
Poland has some 13 million apartments, including 8.7 million in the cities and 4.3 million in rural areas. That means an average of 341 apartments per 1,000 residents. The European Union average is 450. For example, in the Czech Republic, that figure is 430, and in France, Spain and Portugal over 500. So this means the Polish residential market is still underdeveloped and offers considerable growth potential. Emmerson's Research and Analysis Department has compared the number of existing apartments with the number of independent households, taking into account apartment owners willing to move to a new or bigger location as well as real estate investors, and has concluded that Poland is short of at least 1.5 million apartments.

Does this mean there is room for the market to grow further?
Of course. If you compare these figures with the number of apartments completed last year-a little under 134,000, or 16 percent more than in the previous year-you will arrive at a clear picture of the market. There is still a huge demand for apartments and it is from this point of view that we should analyze the present market stagnation, with clients waiting for the prices to drop and fewer transactions, and a general summer period slowdown.

On the Warsaw residential market, buyers are less willing to pay very high prices while developers who started many projects in the boom years are now offering a considerable number of new apartments. How will this situation develop?
Developers usually react to such situations by changing the product structure, offering all kinds of discounts and bonuses, or delaying completion of projects that are less likely to succeed on a difficult market. Probably the range of turnkey projects will expand, with different standards of finish available. Until recently, a turnkey standard was offered only as an option for the most expensive apartments. Now projects offering all apartments of this standard are appearing.

Given the number of apartments on which construction started in 2007, at the beginning of 2008 we predicted that some 180,000 units would be completed this year, given the average construction time. Also, last year developers received permits for the construction of over 247,000 apartments.

Will the number of apartments built be lower due to the lower demand caused by high prices and tighter mortgage loan-granting criteria?
The situation is changing due to many factors, such as macroeconomic developments and the international economic situation. Individuals and companies from the world around are investing in the Polish real estate market and they compare Polish conditions with other markets. On the one hand, we can see a withdrawal of speculative capital, with investors skeptical about any further price growth in Poland. On the other hand, new developers and investors from the world around are arriving, after observing and examining the Polish market. Of course, the supply of new apartments is highest in Warsaw, but the number of potential customers is growing too. Stagnation has affected mainly resale properties that were overvalued due to high demand. Apartments in new projects and in modernized buildings and tenement houses in good locations maintain good prices.

There are also new developing markets. After Warsaw, Cracow and Wrocław, good times have come for Gdańsk, Poznań, Katowice, ŁódĽ and areas around these cities. We should also remember medium-sized cities of 100,000-150,000 residents, where demand for modern apartments is also rising.

What about luxury apartments?
The luxury apartment and house market in Poland is growing systematically and has not been hurt by the downturn. The supply of mid-level apartments, which are the most sought after, is growing, and there are also new top-shelf apartment projects priced at zl.15,000-30,000 per sq m, and not only in Warsaw.

All these factors have to be taken into consideration in order to forecast developments on the Polish residential market. Over the last three years it has changed dynamically, and market analyses have focused on short-term prospects. Meanwhile, the real estate market should be viewed in a longer time frame. It seems that the most interesting stage of its development is still ahead of us.
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