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The Warsaw Voice » Real Estate » July 30, 2012
The Real Estate Voice
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Potential for Growth
July 30, 2012   
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Iwona Dekarz, director of sales and residential marketing projects for developer Echo Investment, talks to Marcin Kłosowski.

What’s in store for the housing market in Warsaw and other big cities in Poland, especially in terms of prices?
The Polish residential market today is mature and stable, though there is still great potential for further growth—more than 1 million apartments are still needed, and in this respect Poland has one of the worst indicators in Europe. We also lack quality housing. The bulk of the housing stock reflected in statistics are apartments built in the second half of the century, which are less and less capable of meeting customer expectations today. Not only are customers’ expectations changing, but also the technological, legal, functional and environmental standards that future projects will have to meet. Newly constructed residential buildings are becoming more sophisticated and better equipped, and this influences the cost of the project and is ultimately reflected in the price of the apartment offered. Another key factor that influences the price is the project’s location. The slight downward trend in the average price of housing observed today is still the effect of the market slump that we were dealing with a few years ago. As for the future, we can’t expect any significant price declines—the number of good locations is not increasing and technological requirements are pushing up the costs of projects. The profit margins of construction companies and developers are already so low that they don’t significantly influence the final price.

Our recent experience in the biggest Polish cities shows that at present we are dealing with a stabilization in terms of both the prices and the rate at which housing is sold. We have been observing a strong interest in projects at the initial stage of development when the choice of housing and the room for maneuver in negotiating the terms of the transaction are the greatest. This indicates that there is a large group of customers who are actively looking for housing for themselves rather than for investment purposes. And this means that customers are still looking for well-located, well-designed and well-constructed dwellings at reasonable prices.

Is this the time for strong players?
The housing market is very broad, but of course experienced companies find it easiest to move around it. Housing is at the same time a sector that engages the customer emotionally more than any other. A good, tried and tested developer guarantees that, first, the right deal will be made and, second, that the customer will be comfortable throughout the process of buying a new apartment. The new regulations governing the operations of developers will provide customers with additional protection, though most of the developers already active on the Polish real estate market have long been meeting the new standards—especially as it wasn’t the lawmakers, but the developers themselves who set these standards. The new regulations will limit the operations of companies incapable of meeting market requirements—and this is good news for both customers and developers who take their business seriously and are forward-looking.

In Warsaw, your company focuses on premium housing. Is this because this market segment is the most promising?
In Warsaw, we build premium apartments and high-standard flats. Most of our projects are carried out in the most interesting and attractive neighborhoods in the capital such as Mokotów, Żoliborz and Saska Kępa. These locations pre-determine the caliber of our projects, and our final offering is based on studies of the latest market trends and customer expectations. The appropriate adaptation of our range to customer expectations is the key to the customer’s decision, and our customers are particularly demanding. The market sector in which we operate is obviously less popular and is a kind of niche, yet it brings together what is best in residential real estate. On the one hand, prestigious and luxurious projects set a model to follow in terms of prevailing standards; on the other, they are a source of inspiration in terms of solutions used. The future size of this market segment depends on what happens in the economy as a whole, particularly in terms of economic growth, and how prosperous Polish society is. The premium housing market will certainly grow in proportion to other segments although this segment, even if more difficult and more demanding, is more stable and resistant to economic fluctuations.

Will you continue to focus on Warsaw or are you also eyeing other promising markets?
Of course, we will continue to develop our business in Warsaw, but the Polish housing market is not just the capital. We also have some very good experience in other regions in Poland. We carry out our projects in Cracow, Wrocław, Poznań, ŁódĽ and Kielce—in each of these cities we are preparing new projects. All these cities have great potential and in all of them, except ŁódĽ, we have been active for many years. The key to success in any market is to take into account the local conditions, especially evaluate the location in the right way and choose the standard accordingly.

Locally, the housing market is very diverse, particularly in regard to specific segments. Of course, the “popular housing” segment is developing the fastest and offers the greatest opportunities, but our observations show that interest in high-standard flats, including premium apartments, is also growing outside Warsaw.

What, in your opinion, is currently the biggest barrier to the further development of the housing market and an increase in housing sales?
The biggest and, practically speaking, only barrier is access to financing. It’s true that we are becoming increasingly affluent as a society, but this process is slow and does not always translate into increased purchasing power. In this situation, a good solution could be to increase the availability of mortgages, though we don’t really expect a breakthrough in this area. More opportunities could be created by the introduction of tax breaks for those investing in housing, a more liberal tax policy and greater government support. While the termination of the government’s Family on Its Own program doesn’t augur well for the future of this kind of solution, the new regulations governing the operations of developers may indicate that the lawmakers are aware, at least to some extent, of problems related to the housing market. After all, housing is a very important branch of the economy and an extremely important social issue.
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