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The Warsaw Voice » Real Estate » April 29, 2009
The Real Estate Voice
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Crisis? We’re Still Selling
April 29, 2009   
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Developers who bought vastly overpriced land two or three years ago are now complaining of a crisis. Others were more prudent and are still selling apartments, Wojciech Fabiński, president of Eco Classic, tells Magdalena Fabijańczuk. Eco Classic is the parent company in the Eco Group, which has been on the Polish construction market for 25 years.

Looking back at the last 25 years, how would you assess the problems developers are facing today?
Potential demand for homes is still very high, but it is constrained by the existing level of people’s affluence. Besides, the Polish real estate market tends to react sharply to any changes.

Our 25 years on the market can be divided into two main stages. We started operating as an architectural and construction company still before Poland moved to a market economy. We provided services for the state, which was the only investor in those days. We designed and built schools, outpatient clinics and hospitals, and renovated old tenement buildings. Our first commercial project that we started in 1993 was the Rezydencja Canaletto residential building on Panieńska Street in Warsaw, with large apartments of 110-120 square meters. Our competitors thought we were out of our minds because even small apartments were difficult to sell in those days. I used to answer them: “This is exactly why we are building homes for those who have money.”

Were your first projects different from those you are carrying out today?
Each of our projects was carried out in a different reality. At the beginning, our clients did not use any loans at all because interest rates were in the double digits. As a result, it is difficult to draw analogies.

Did your past experience help you shield Eco Classic from the latest crisis?
We are not complaining about the crisis and are still selling apartments. One thing has changed—clients are interested in apartments that have already been built. They are no longer interested in buying apartments that are still at a stage where the developer has only started to build the foundations—and this situation will not change for a long time. This may sound strange, but I was not happy with the skyrocketing home prices in 2006 and 2007. It was clear that this bubble would burst with a terrible bang. However, I did not expect it to burst so soon. There were a few other developers who thought the same at the time and they are doing well now.

Does that mean developers could have safeguarded themselves against the crisis?
Two or three years ago, it was very easy to become overenthusiastic. Developers were buying overpriced land because the general belief was that customers would pay for it all. Now, these companies are talking about a crisis. Another thing is that many developers were ready to pay horrendous prices demanded by construction companies. In 2007, we were looking for a general contractor for the Hubertus housing estate in Warsaw’s district of Mokotów. We had a very big problem with selecting the general contractor. The difference between the cheapest and most expensive bids exceeded 100 percent. At that time, no one calculated the real costs and the prices asked had nothing to do with reality. We did not award the tender and decided to build the housing estate on our own. As we originated from an architectural and construction firm, we had the right people on our team. Eventually, the construction of the Hubertus estate cost us 30 percent less than we would have had to pay the company which bid the lowest price. We managed not to overpay. This is a good example of how easy it was to make a mistake during the time of the housing boom.

Have you lowered the prices of your apartments these days?
One of the projects we are now selling is the Hubertus estate, with apartments for more affluent clients. We have not lowered our prices, but are open to negotiation. For several weeks now we have seen an increased interest on the part of prospective buyers and a rise in prices in real terms. Just two months ago we had to offer discounts that were several percent higher than now to sell apartments. Why is this the case? The reason is that developers are not starting new projects. Although the number of apartments offered for sale is high, the most attractive ones are disappearing by the week. And the clients who are really determined to buy have already noticed that.

And I also want to debunk the myth that banks have stopped offering loans. Banks no longer lend 120 percent of the property’s value, but this is not a crisis. I think the situation in which a bank requires a 15 or 20-percent downpayment means a return to normalcy.

One of Eco Classic’s latest projects is Trio, an apartment building with hotel-like services. How are luxury apartments selling these days?
Luxury apartments in good locations have always sold differently than standard apartments. We started building Trio last year, but we did not advertise the project until a few weeks ago because this building needs to be shown. Promoting an idea no longer works. Trio has to lure customers because people buy luxury apartments for various reasons. Some of our customers live outside Warsaw and come here on business. Among our customers is a wealthy married couple living several dozen kilometers from Warsaw. They like to visit the city every few weeks to go to a theater, opera, exhibition or a good restaurant. They do not want to stay in hotels and this is why they are buying an apartment.

Trio is a unique project in our portfolio. We treat it as our flagship project. It sums up Eco Classic’s 25 years on the market.
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