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The Warsaw Voice » Real Estate » October 29, 2008
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Quality in Demand
October 29, 2008   
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High apartment prices have led speculators to withdraw from the market, resulting in a drop in demand. Other factors affecting the number of transactions include more difficult access to loans and banks' higher margins.

Supply of apartments hit a record in recent years. Interest from buyers is now waning, though, due to a combination of several factors. First of all, at today's prices speculative purchases of apartments are unprofitable, especially as a "mass-scale" investment. More difficult access to bank loans also contributes to the decreasing number of transactions. Even clients themselves, disorientated in the face of rapid changes on the financial market and news of an impending global crisis, are putting their apartment purchases on hold. Another factor affecting the residential market is the development of single-family housing construction in recent years. Despite all this, analysts are not talking about a crisis but a wait-and-see attitude and forecast that the supply of new projects in a few years will again be unable to meet the demand for apartments. Meanwhile, new road infrastructure connected with the Euro 2012 soccer championships will lead to new developments being built outside city limits as well.

Poles need homes
According to analyses by redNet Consulting, Poland still has a shortage of apartments and assuming that the number of households does not change, at current levels it will take 10 years to make up for the deficit. After subtracting people who have emigrated but might come back, Poland is short of 1.4 million homes today.

Analysts predict that the recession will clear the developer market of small companies that started building housing estates in the wake of the boom of two-three years ago. The market is starting to mature because demand is decreasing and consumers are making more well-informed decisions. The most important thing is no longer the number of units on offer but their quality. Contrary to buyers' expectations, so far the market has not reported any spectacular price drops. Reductions, if any, are of the order of a few percent. However, buyers can count on individual negotiations and other bonuses because developers are already feeling the reduced demand and are offering various incentives to bring the buyers in. They offer free storage rooms, parking spaces or bonuses such as a finished bathroom. It is also increasingly possible to negotiate the price individually.

Seaside attractions
The Gdańsk-Sopot-Gdynia Tricity, mainly due to its coastal location, is an attractive region for residential investment projects. The most expensive apartments are being built on the seaside strip, mainly luxury and improved-standard apartments, including vacation homes. According to redNet Consulting data, Sopot and the coastal strip with the promenade connecting the New Port in Gdańsk with the old port in Gdynia are the most expensive locations. In the first quarter of this year 1,446 apartments were completed in the Tricity (compared to 890 in the first quarter of 2007) and 1,940 construction permits were issued (2,388 in the first quarter of 2007). The average price of apartments offered in July was zl.6,531 per sq m, according to redNet Consulting.

Analyses by Emmerson real estate services company show that in the second quarter of this year there were 60 residential projects in progress in Gdańsk alone, comprising a total of 7,500 future new apartments. The average price per sq m in Gdańsk is zl.7,419.

The Neptun Park housing estate is being built on the beach of Jelitkowo, on the seaside strip on the border of Sopot and Gdańsk. These are three- and four-story buildings with apartments ranging from 30 to 190 sq m. The investor is Pomeranka, a company established by PKO Inwestycje for this project. Residents will have access to a nearby park, a yachting club, beach, boulevard and a pier. Completion is scheduled for the fourth quarter of 2009.

Another project by developer PKO Inwestycje, planned for completion in the second half of 2009, is the Arkadia apartment complex in Międzyzdroje, 150 meters from the Baltic shore, offering about 220 apartments with a total area of 12,000 sq m.

There are many ongoing residential projects in Katowice and other cities in Upper Silesia. According to analysts at Emmerson, almost 2,440 apartments were under construction at the end of the second quarter, meaning a growth of almost 100 percent compared to the start of the year. The main reason was that the Katowice market saw the arrival of three large developers: GTC, the Bryksy Group and Inwest PA. Most of the projects are located in the north-central and western part of the city.

A number of luxury apartment projects are also in progress in Katowice. Griffin Real Estate is completely refurbishing a tenement house from the turn of the 19th and 20th centuries at the intersection of Kościuszki and Powstańców streets in the southern part of the central district of Śródmieście. The building used to house a bank. After renovation it will comprise 19 apartments ranging from 50 to 140 sq m. All the premises will be completely restored, including common spaces and the richly decorated facade. The new owners will be able to move in in January 2010.

Emerging markets
The boom on the housing market observed in 2006-2007 applied mainly to the largest cities in Poland. Smaller cities reported growth in the supply of apartments with some delay. The most promising of these markets are Bydgoszcz, Białystok, Lublin, Rzeszów, Toruń and Szczecin.

Białystok is one of the biggest construction sites, with as many as 42 residential projects in progress, according to Emmerson. Białystok is the capital of Podlasie province and the largest city in northeastern Poland, with a population of almost 300,000.

The largest number of apartments per capita is being built in Rzeszów, the capital of Podkarpacie province, with a population of more than 170,000.

Emmerson estimates that the most expensive apartments on the primary market of the above-mentioned cities were those in Szczecin, where one square meter cost an average zl.5,617.

This December will see the completion of the Villa Modra housing estate built by developer Hirny BD SA. This complex of 26 buildings in a semi-detached design is being built at 25A Modra St. in Szczecin's district of Krzekowo-Bezrzecze near the Arkoński Forest. There will be 52 homes in all, ranging in area from 47.9 to 97 sq m. First-floor homes will have access to a garden. Most of the buildings will have large garages and utility space in the basements. The estate will be fenced, and vehicles will be able to get in through a gate operated by a magnetic card. The prices of these apartments range from zl.4,790 to zl.5,790 per sq m.

Magdalena Fabijańczuk

Residential Construction Up

Szymon Jungiewicz, research and analysis director at Emmerson:

Residential construction is the smallest segment of the Polish construction sector. Over the past few years its share in the sector was around 14-15 percent.

2007 was a record time for construction companies providing services in residential construction. According to our estimates, after the 9-percent growth in construction companies' sales generated by residential projects in 2006, sales grew by as much as 38 percent in 2007. This was the result of increased activity of housing developers who started a record number of new projects. Today demand dominates visibly over supply on the residential market.

Of the 133,700 homes completed in 2007, developers completed 45,700 (34.2 percent of the overall number of new homes). Individual investors building single-family houses still dominate-in 2007 they completed 71,600 new homes (53.5 percent of the total).

A record number of construction permits were issued in 2007-247,700. Analyzing the permits by type of investor, developers came ahead of individual investors with permits for 117,500 homes, compared to 110,500 issued to private individuals.

We predict that the observed increase in supply on the primary residential market and developers' problems with selling apartments will lead to a reduced scale of operations (developers are already delaying and cutting down on new projects, waiting to finish selling homes in projects currently underway). We do not predict any sudden collapse, though-our estimates assume about 20-percent growth on the residential construction market this year. The worsening situation on the loan market may become visible on the residential market in 2009. For now, we predict 9-percent growth in residential construction in 2009, but the coming months will show if such a scenario is feasible.

Poles Buy Weekend Homes

Matylda King, residential sales & business development director at Ghelamco Poland:
Second homes are primarily recreational in function and differ from the owners' everyday homes in several respects. Location is the most important factor. The ideal place is a recreationally attractive area, not far from a large city. Contrary to a regular home, a second home does not have to have access to schools, preschools, government offices or even stores. Going away just for the weekend or even for a longer vacation, the owners usually do their shopping in advance and take what they need with them. This means less time wasted on shopping and more time to relax as soon as they arrive-which is exactly what a second home is for.

Aesthetic considerations are of primary important for second homes-the view, closeness to nature, nice architecture and beautiful surroundings. This type of home also needs different interior design, with large and luxurious common spaces and comfortable bedrooms. Such an apartment does not have to have a spacious kitchen fitted with complicated appliances. The main consideration is comfort and convenience for household members.

Second homes are extremely popular in the United States. From there, the fashion for them came to Western Europe. As yet the market range of projects specifically for this purpose is not extensive in Poland, but the number of people interested in buying a weekend home is growing.

We need to remember that the Polish real estate market is stabilizing and is becoming more and more like Western European markets. Society is more affluent and more and more people can afford to keep a second home. Also, many people treat buying real estate as a good investment. This means a promising future for the second home sector and we should expect an influx of projects to the market that meet the expectations of clients in search of this type of apartment or house.
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