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The Warsaw Voice » Real Estate » September 30, 2011
The Real Estate Voice
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Revival on the Housing Market
September 30, 2011   
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Housing sales have increased this year and many projects that were disrupted by the crisis have resumed. Yet the market is still a far cry from the boom of several years ago.

A residential market report by real estate consultants REAS, who provide advice to those planning and carrying out housing projects in Poland, shows that the second quarter of this year saw a further increase in new home sales. The improvement is chiefly due to the fact that the Polish economy accelerated markedly in 2010 and entered 2011 with a stable labor market and steadily rising incomes. The number of individual mortgage loans granted by banks has stabilized at a relatively high level and interest rates remain exceptionally low.

The market monitoring study conducted by REAS at the end of the second quarter indicates that the supply of new housing in the six largest markets in Poland (Warsaw, Cracow, Wrocław, the Tricity area comprising Gdańsk, Sopot and Gdynia; Poznań and ŁódĽ) increased for the seventh consecutive quarter and was 29 percent higher than a year earlier.

One reason behind this is that the number of housing units launched for sale remained high. However, the sales result was slightly lower than in Q1 2011 and at the same time much lower than the number of homes brought to the market. Additionally, even though developers usually expect better sales in spring, the second quarter of the year saw a drop in this department, following three straight quarters of increased sales.

During the last four quarters, a total of 29,900 residential units were sold on the analyzed markets, 8 percent more than in 2010 and over 17 percent more than in 2008. The REAS study shows that the total number of dwellings launched for sale in the six largest conurbations in Q2 2011 exceeded 10,600 and was over 20 percent higher than in Q2 2010 and 1 percent lower than in Q1 2011. The number of units brought to the market during the previous four quarters exceeded 37,000, almost 5,000 more than in 2008 as a whole. In the first half of 2011, a total of over 21,300 dwellings were launched for sale, the highest figure since the first half of 2007.

Data published by the Central Statistical Office (GUS) on the number of dwellings started in H1 2011 seems puzzling in this context, according to REAS analysts. While Q1 saw a significant, 14.5% increase over 2010, the total number of units started in H1, at 28,529, was 9.3 percent lower than in the same period of the previous year. Since the number of units launched for sale in the major Polish markets is currently growing, either some of these dwellings are being launched for sale after securing building permits but before formally launching construction, or we are witnessing a repeated concentration of developers’ construction in the largest agglomerations, accompanied by decreased activity in smaller markets, REAS says.

Despite stable sales, the availability of new housing in the six conurbations exceeded 46,000 units at the end of Q2 2011 and reached the highest level in the history of Poland’s developer market. The supply is dominated by units under construction, which constitute 78 percent of the total number of dwellings, and by units scheduled for completion in 2012 (47 percent).

Compared with the previous quarter, the number of completed and unsold units was slightly higher. In total, the six analyzed urban centers offered close to 9,700 completed and unsold units and this figure increased by 6 percent over the year. At the end of June, in Warsaw there were around 4,000 such dwellings, slightly less than in the previous quarter.

The second quarter of 2011 put an end to the downward trend in the asking prices of units newly launched for sale. After a period of price drops or stabilization, which began in Q4 2008, in Q2 2011 developers increased both the number of units introduced to the market and their prices. Consequently, for the first time in a long while, the prices of new units launched for sale started to resemble the prices of units already on the market. This could be one of the reasons for the slowdown in sales. Considering the current surplus of supply over demand, in the following quarters prices will either decrease or remain at the present level, according to REAS.

“While in Q2 2011 the downward trend in the average price of units introduced to the market was overcome, we need to bear in mind that this index depends to a large extent on the characteristics of launched projects. Its increase partly results from the fact that, after a period of limbo, developers finally decided to start selling more projects in downtown and central locations rather than affordable schemes, which were mainly brought to the market directly after the crisis. One should also note that even though nominal asking prices increased slightly, they still lag behind inflation, which grew rapidly during the last year,” said Kazimierz Kirejczyk, CEO of REAS.

According to the company, in Q2 2011, total sales on the six analyzed markets decreased by close to 5 percent from Q1, even though the market had expected a slight growth or at least stabilization in the sales level. Considering the growing supply, this translates into a significant drop in sales per project, as confirmed by information coming from many developers. In the majority of the cities, total sales in the last four quarters were slightly higher than the long-term average for these markets; in Wrocław the surplus was significant. In this respect, the only exception is Warsaw, where around 11,800 dwellings were sold in the analyzed period, roughly 1,000 less than the long-term average transaction level for this market.

Demand in the five urban centers is promoted by a combination of fundamental factors: more baby boomers graduating from university, entering the job market, establishing families, and starting an independent life as adults. These locations are still attractive for young Poles from smaller cities and villages, especially as the government has declared it would focus on fostering economic development in the largest cities in the coming decade.
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