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The Warsaw Voice » Real Estate » August 2, 2010
The Real Estate Voice
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Housing Market Returning to Equilibrium
August 2, 2010   
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The first half of this year saw the market return slowly and arduously to a state of relative equilibrium, with liquidity being restored to both the supply and demand side.

Maciej Dymkowski, CEO of online real estate service tabelaofert.pl:
Looking at the changing services offered by banks, growing sales and the launch of new projects on the market, one can say that we are increasingly close to equilibrium, although it is still quite fragile. The big changes witnessed in the cities of Cracow, £ód¼ and Poznań have resulted from half a year of market adjustment to the present-day situation.

The prices shown in the tables are for the end of June 2010. The percentages show how the prices changed from the end of December 2009. The data was collected by the tabelaofert.pl real estate service and supplemented with the findings of market research conducted by analysts from redNet Consulting.

The primary market supplies new housing stock. The new dwellings ease the housing shortage, which is still estimated in Poland at more than 1 million units. What was the situation on the market for newly built homes in the first half of the year? First of all, the market started to regain liquidity. Sales offices reported a rise in the number of people eager to buy apartments. Importantly, the gradual liberalization of lending policies by banks made homes more affordable. As a result, the stock of homes offered on the primary market started to shrink.

Additionally, developers received a clear signal that demand was on the rise and—responding to the new situation—started to sell homes in the new projects which they had not dared to offer to clients in 2009 or the fourth quarter of 2008. At the same time, where possible, some of the projects were redesigned in order to increase the amount of one-bedroom apartments and reduce the floor space of homes offered for sale so as to achieve total prices acceptable by the market. Apart from these measures, developers had to change the standards of homes offered to buyers, giving preference to average-standard apartments at the expense of high-standard ones. As a result, average asking prices dropped in some cities, mainly in Poznań and Cracow, but also in Warsaw and to a smaller extent in £ód¼. The coastal city of Gdańsk was the only place where average asking prices increased.

One should remember, however, that adjustment to the new market situation had taken place in this city earlier than elsewhere. Additionally, Gdańsk is a “holiday” location, with projects in the coastal zone commanding much higher prices than apartments built to meet the primary housing needs of the local residents.

The average prices of sold apartments followed the asking prices trend, with sharp drops in Poznań and Cracow. The same trend was reported in £ód¼, though with smaller price drops. Warsaw was the only market where asking prices fell, but the prices of sold apartments increased slightly. But the Warsaw market is much larger and more varied than the other markets. It comes as no surprise then that there are clients on this market, especially people who already own a home, but are looking for a more expensive apartment.

The market is expected to calm down in the coming months, with developers focusing on providing products as affordable as possible. There is an interesting situation in the southern city of Wroc³aw, where the level of asking prices is still high. The question is whether it is not too high. If so, by the end of the year the asking prices may fall below zl.8,000 per square meter and the prices of sold apartments below zl.7,000 per square meter.

As the secondary market is extremely varied, we have divided it into two parts: older apartments built before 2000, a majority of which are apartments in prefabricated blocks, and younger ones built with the use of new construction methods in 2000 and later. The data in Table 2 show that the division in this market segment was necessary and justified—the difference in average prices per square meter ranges from around zl.500 in Gdańsk to zl.1,900 in Poznań.

In the first half of the year, prices dropped the most in £ód¼, Cracow and Wroc³aw. In Poznań, there was also a sharp downward adjustment in the prices of older apartments. Some of the sellers ignore the real situation on the market. They base their valuation on the prices of new apartments, adding a “premium” for the opportunity of moving in immediately and the cost of finishing works. This rule is right in principle, but it is not always applied in the right manner. On the market, there are still unsold homes offered by developers. The stock of these homes is gradually diminishing and the choice is increasingly limited, but we are still far from what happened in 2007, when the only chance for the buyer to move in within a short time and actually see the apartment was to buy one on the secondary market. It is clear that in the aforementioned cities prices asked by sellers did not meet the expectations and financial capabilities of buyers.

A different situation was reported in Katowice and Gdańsk, where prices went up. The supply of new apartments in Silesia, after a temporary revival in the second half of 2007 and the first half of 2008, is still limited. As competition from the primary market is weak, private sellers have more freedom in shaping prices. In Gdańsk, newly built apartments rival secondhand homes, but Gdańsk has the most liquid primary market of all the discussed cities. In Gdańsk, finished apartments account for the smallest percentage of housing units offered by developers, and the time between signing a sales agreement and collecting the keys is the longest. As a result, interest in secondhand homes, available for immediate occupancy, is greater there than in the other cities.

In the coming months, the market is expected to be calm in most cities, with only slight fluctuations. Asking prices seem to be a bit overvalued in Warsaw. If the number of new medium-standard apartments continues to grow in the city, the secondary market will have to react as far as prices are concerned. This is particularly true of older apartments in prefabricated blocks. There is no reason why they should be more expensive than new apartments built by developers.
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