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The Warsaw Voice » Real Estate » July 29, 2011
Warsaw Residential Real Estate Guide
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New Apartment Sales on the Rise
July 29, 2011   
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Poland’s housing market revived in the first several months of this year. Sales of newly completed apartments and other housing units increased and developers resumed projects they had put on hold after the outbreak of the crisis.

The REAS company, which provides advice to developers planning and carrying out residential construction projects, has released a report on the Polish housing market and found that the number of transactions for the sale of new dwellings increased again in the first quarter of this year.

REAS has also found that the number of available apartments rose markedly in most cities. The increase resulted not only from new projects out on the market, but also from resumed sales of housing units in projects that had been put on hold during the economic slump. Consequently, the number of housing units for sale on Poland’s six largest markets, Warsaw, Cracow, Wroc³aw, the Tricity area, Poznań and £ód¼, grew for the sixth quarter in a row and was 36 percent higher than in the first quarter of last year.

In terms of the number of housing units sold, the first quarter of this year was better than the one before it and saw the highest sales since the fourth quarter of 2007. From the end of March last year to the end of March this year, a total of around 28,600 housing units were sold on the six largest markets in Poland, 27 percent more than in 2009 and almost 13 percent more than in 2008.

The REAS report also shows that in the first quarter of this year, over 10,700 dwellings were put on the market in the six metropolitan areas, which was 67 percent more than in the first quarter of 2009 and 26 percent more than in the last quarter of 2010. In the last 12 months, the number of new housing units on the market rose above 35,000, which was almost 3,000 more than the number of dwellings put on the market in the whole of 2008.

Although data from the first three months can hardly serve as a solid basis for 12-month forecasts, there was a clear increase in the number of housing units under construction compared with the previous year. Compared with the same period last year, the January-March increase in the “for sale and to let” category covering developers was a healthy 14.5 percent.

Despite the relatively good and regular sales, the supply of housing units in the six metropolitan areas taken together reached almost 42,000 at the end of the first quarter of this year. As far as the expected completion date is concerned, the proportions kept changing slightly from quarter to quarter, with a prevalence of housing units under construction. At the end of the first quarter, those accounted for almost 77 percent of all available dwellings, 32 percent of which were located in projects scheduled for completion this year and over 50 percent next year. In comparison, at the end of the first quarter of last year housing units which were under construction accounted for 70 percent of the supply.

According to REAS analysts, developers who are putting more housing units on the market are also trying to raise the number of potential buyers and better adapt their products and prices to the buyers’ financial capabilities. Per-square-meter prices in new housing units have been slowly declining for several quarters, but the average apartment price is equally influenced by the shrinking sizes of newly built dwellings. Coupled with stable financing conditions, this factor seems to have allowed the gradual sales increase.

At the same time, news from companies indicate that this year developers are planning to put more new projects on the market than last year. Given the current surplus of supply over demand, prices are highly unlikely to increase in the coming months and in fact they will probably drop slightly again.

Wider choice, more transactions
Everything seems to suggest that developers have recovered from the crisis. The REAS report shows that the first three months of this year were the third quarter in a row with growing sales of housing units. The sales were 4 percent higher than in the last quarter of last year and 14 percent higher than in the first quarter of 2010. Notably, the first quarter of each year is usually the worst in terms of sales and what’s more, a slight decline could be expected this year due to raised VAT rates. With that in mind, sales at 8,000 housing units in the first quarter can be objectively regarded as very good, REAS says.

In the long run, stable or gradually growing sales ensure almost optimal conditions for developers to make plans. New developer projects should be bound with fewer risks thanks to buyers who make well-considered purchases, banks which grant loans relying on thorough solvency analyses and the fact that there are no factors that could cause an overnight mood change in market players.

In most cities, total sales in the past four quarters were just above the long-term average number of housing units sold on those markets. The sales were clearly higher in Wroc³aw, whereas Warsaw was an exception with sales of 11,400 housing units, around 1,500 below the city’s long-term average number of transactions. It thus seems that, compared with other cities, Warsaw still has the strongest potential when it comes to sales increases.

Warsaw has long been the main housing market in Poland, boasting the highest prices and the biggest supply of new housing units. Some of the most interesting residential projects currently under way in Warsaw include the Aleja Krakowska Housing Estate being built by the Dolcan company, Kaskada na Woli by Gant Development, the 19. Dzielnica Housing Estate by the Pro Urba company from Spain, the Saska Housing Estate by Dom Development, and Zielona Italia by Marvipol.

Stable prices
Contrary to what analysts anticipated, the increased VAT rates, effective as of the start of this year, have not taken their toll on housing sales. The prices of new dwellings have not increased, as most developers choose to shoulder this extra burden themselves.

Despite the high supply of new housing units, developers have seen the highest sales since the fourth quarter of 2007. A major part has been played by the government’s Rodzina na swoim (Family in Its Own Home) mortgage subsidies program, which helps people take out loans and buy apartments.

When the government announced plans to alter the program some time ago, many Poles felt prompted to buy apartments sooner and those who were keen to get a place of their own under the original version of the program applied for loans in the first quarter of this year.

The slight price variations in new dwellings and the growing supply of housing units in most cities are confirmed by reports by the research and analysis department of the Emmerson SA company. The reports focus on the main housing markets in Poland in the first quarter of this year. Emmerson analysts have surveyed seven cities: Warsaw, Cracow, Wroc³aw, Poznań, Gdańsk, £ód¼, and Katowice. In three, the average developer prices for housing units declined since the previous quarter, while in three others they increased. In all cases, the changes were slight. The greatest increase occurred in Poznań, at 1.5 percent, and the greatest decline in Gdańsk, at 3.6 percent. The highest prices were reported in Warsaw at zl.8,900 sq m and Cracow at zl.7,300 sq m. Wroc³aw came in third at zl.6,900 sq m, closely followed by Poznań at zl.6,900 sq m. Further down the list were Gdańsk (zl.6,500), £ód¼ (zl.5,600), and Katowice (zl.5,400).

According to Emmerson, in some of the cities average prices declined because developers continued to sell housing units in less expensive projects. However, the decline in average prices decelerated in the first quarter of this year compared with what happened throughout last year. In the first quarter of this year, considerable price cuts were mainly offered by developers who sold completed dwellings and those who were keen to find buyers for the last few apartments available in their projects.

Overall, Poland’s housing market is reviving. Developers are starting to carry out projects they planned earlier and are searching for land for new ones. The supply on most regional markets is growing and many developers expect higher sales this year, which shows that they are optimistic about the market.


Commentary
Reflection Time
S³awomir Horbaczewski, vice-chairman of the board at Marvipol SA:

Confucius distinguished between three methods of acquiring wisdom, imitation being the easiest of the three. There was a lot of imitation on the market for real estate in Warsaw, especially halfway through last decade. That period of more or less four years proved to be deceptive for all companies which were beguiled by unnatural rates of return in the developer sector, especially when it came to apartment buildings, and rushed headlong onto the Warsaw market. Little did they know that a few years later they would see housing prices nose-dive and contractor prices skyrocket, making the business far less profitable than what it used to be. Unexpectedly, the companies faced the most bitter method of learning wisdom which, while essentially empirical, taught them unique skills. Many developers got a first-hand experience of economic and investment slowdown and the anxiety that came with it, namely, who would be booted off the market and how.

In the next five years, the market was dominated by reflection, the noblest way of learning wisdom. It was a time for investors to stop to think about the world around them and reflect on all the rash decisions they had made and could have avoided with a little common sense. Decisions such as entering the developer sector in the first place.

We have thus come full circle, seeing that not only was Confucius right, but also realizing that luckily, at least some participants in the market have adopted a normal attitude to it. This will clearly and enormously benefit all real estate market players.
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