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The Warsaw Voice » Real Estate » July 29, 2009
Warsaw Residential Real Estate Guide
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Opportunity for the Bold
July 29, 2009   
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Developers, forced by banks to sell 30 percent of new apartments in a development before they are even built, are likely to set much lower prices in the early stages of a project, Kazimierz Kirejczyk, president of REAS, a consulting company specializing in residential project planning and construction, tells Magdalena Fabijańczuk.

What is the state of the Warsaw housing market, compared to the rest of the country?
Looking at other cities around the country, the Warsaw market is exhibiting very average behavior. The volume offered is average, and while prices are going down this is not as spectacular as in Poznań, for example. This means most developers have not been forced to make drastic price cuts. On the other hand, looking at sales-1,990 homes in the second quarter of this year-there can no longer be any talk of a severe collapse. However, things are different for different companies and projects. At some -after a significant price cut-sales are returning to normal. Some developers have withdrawn their projects from the market because they were unable to continue them with the current real price levels.

Can buyers count on further price cuts?
In the case of finished homes or those close to completion, in the segment of up to zl.550,000 per apartment, I wouldn't expect any major price drops. Two- or three-room apartments in particular won't get cheaper because they are the most sought-after. In the case of much bigger homes buyers can look for bargains, especially if they have cash or easy access to a loan.

Varsovians are holding back from buying a home. What will the market be like after the crisis?
The situation won't change fundamentally over the next three quarters. Banks will follow similar policies as today. There will still be a great many apartments available and a good selection. Prices won't drop substantially, but the gap will grow between prices for completed projects and those still in progress. Buyers willing to gamble can hunt down bargains in new buildings.

Does that mean people will go back to buying "a hole in the ground" again?
Buyers always take a risk when they buy a home that isn't there, but that's precisely why it's much cheaper to buy such a home. Apartments are selling slowly, banks granting loans to finance construction are demanding that 30 percent of such homes are sold before they are built. What does that mean for developers? It means that before they sell the required 30 percent, they have to build using their own money for a year or even longer. That's why at this stage investors will be prepared to sell apartments for much less to achieve the required advance sales. We can expect prices in cases of advance sales to be very low-on average in Warsaw even as little as zl.5,500 per sq m. Once bank financing begins, prices may grow significantly.

What kind of homes are most in demand in Warsaw?
On the demand side, two groups are the most active: those buying their first home and young families who want to exchange their home for a bigger one. That's why two-room and one-and-a-half-room apartments with 45-50 sq m of space are so popular. A one-and-a-half-room apartment consists of an open-plan kitchen with living room, a bathroom and a bedroom. The second group I mentioned is looking for apartments of about 70 sq m with three rooms.

Have you seen any major changes in terms of how attractive different districts of Warsaw are to buyers?
Warsaw residents are rather conservative when listing the districts where they'd like to live. In the past decade, the choice of location for a home was greatly influenced by the metro, thanks to which Bielany has developed, for example. For this reason, Białołęka gets the poorest marks. Prices there are among the lowest in Warsaw.

Wilanów hasn't had a good press lately. What is your view about the residential potential of this district?
Wilanów was always perceived as a prestigious location, with a lot of greenery and the potential for large, pleasant housing estates. Meanwhile, the problems faced by Wilanów's residents seem to be taken straight from the [communist-era comedy] films of [Stanisław] Bareja. Basic infrastructure is missing. It will take time. I think that over the next 10 years Wilanów will become an attractive place to live. Arguments in favor of this district include large reserves of land designated for green areas, consistent development with buildings of no more than five stories and the quality of the buildings there. This is a good time to look for attractive offers in Wilanów, especially large apartments. In 10 years this district will be similar to today's old Żoliborz or Mokotów.

Apartment sales have been dropping for months. How has the rental market reacted?
The rental market is subject to two opposite forces. On one hand, there is the decreasing number of sales transactions, meaning increased demand for apartments for rent. On the other hand, though, many buyers have earmarked their speculative apartments for rent because prices dropped and they would have had to sell them at a loss. That has increased the supply of homes for rent. Rents have stabilized as a result, and some small drops have even been observed.

Though the start of the year brought some signals that you could make money from rentals due to the crisis, I was skeptical about these forecasts from the beginning. The labor market was shrinking and people were unable to pay more and more for rented homes. One- and two-room apartments are the most popular, and in Warsaw you can achieve rents of zl.50-zl.55 per sq m for these. Demand for large apartments is much smaller, so tenants are able to negotiate prices of around zl.35 per sq m. The rental market should not be overestimated as the return on such investment is small.
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