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The Warsaw Voice » Real Estate » November 30, 2010
Residential Market
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Banks Know Local Developers
November 30, 2010   
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Sylwester Bogacki, Chairman of the Management Board, Wikana SA

The start of 2010 was overshadowed by the crisis and the declining demand from 2009, when apartment prices on the primary market dropped by 15-20 percent on average. It was not until the second half of this year that demand entered a revival phase with rising prices and new projects on sale. The crisis affected regional markets to a lesser extent. Demand and prices in smaller cities did not fluctuate as much as they did in big metropolitan areas, which was the result of a lower supply of apartments on the primary market. In larger regional cities such as Lublin and Rzeszów, two-room apartments up to 50 square meters in size were the most sought after. There was also more interest in apartments 110-120 sq m in size and nominal price of zl.500,000 as well as high-standard apartments. These did not cost as much as they did in big cities and once banks softened their lending policies, they became affordable for an increasing number of buyers in the higher income bracket. In smaller cities of up to 70,000 inhabitants, the best-selling apartments had three or four rooms and were 60-80 sq m in size—in other words, typical family apartments. Their nominal value normally stayed below zl.320,000 this year.

As the overall market situation improved, banks also softened their policies toward developers. In contrast to large cities, banks in smaller cities and towns were more liberal in their approach to developers, despite the crisis. One of the main reasons was that projects undertaken in such areas were much more low-key and banks knew the investors better. The upside of dealing with a bank in a small city is that the employees of such a bank simply know the developers and the developers frequently have an account with that very bank. In other words, developers in towns and small cities are not as anonymous as in large ones, where analysts know companies mainly or only from financial reports.

Next year, apartment prices should grow minimally to compensate for the increased VAT rate. A sharp increase is not possible due to the growing supply of apartments that will compensate for growing demand.
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