The Warsaw Voice » Real Estate » Monthly - October 29, 2008
Special Edition: Barcelona Meeting Point 2008
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Residential Market: Just a Correction
Zbigniew Malisz, director of the Polish Association of Developers (PZFD), talks to Magdalena Fabijańczuk about the latest developments on Poland's residential market.

How do you think the latest turbulence on global financial markets will influence Poland's residential market?
Some industry insiders say that the financial meltdown in the United States will bring about a decrease in demand and considerably reduce apartment prices in Poland. I do not share this view. Some demand-limiting processes took place earlier in this country but had no direct connection to the American financial market. Today, to use stock market terminology, we are dealing with a lateral trend. The high rate at which prices grew on the market for two years slowed down last year. So now we are dealing with a correction.

Does this mean that apartment prices are falling?
Talking about average prices without making it clear what the term means would simply be misleading. Sometimes a single luxury apartment building is able to jack up the average price in a district by a dozen or so percent. On the other hand, one run-of-the-mill project could considerably bring the average price down. So, the average price is too much of a simplification. The more important thing is in what market segments prices are declining. Closer analysis shows that apartments are indeed getting cheaper, but only those that have poor locations and are unappealing to buyers. If you ignore both below-par run-of-the-mill projects and apartments that are offered at exorbitant prices, it will turn out that apartment prices are neither going up nor down.

Why do below-par projects keep appearing on the market?
Interest in such apartments has dwindled along with a decrease in speculative demand, which developed at a time when apartment prices were growing fast. Today, we are mainly dealing with fundamental demand from customers who buy apartments for their own use. But that means they are more selective and demanding, and pay more attention to detail.

How will that influence the number of new projects?
The number of new completions will begin to decline in the near future, as developers have started to react to falling demand. Due to considerable inertia in the construction business, supply will again begin to lag behind demand in two or three years. A boom similar to the recent one may not occur again, but demand for apartments is estimated at a healthy 1.7 million today, a figure that may be boosted further by the latest wave of baby boomers, who are now aged 22-24.

In a nutshell, how is Poland's residential market doing today?
Frankly, a wait-and-see attitude prevails for the time being. Developers have put some projects on hold taking advantage of new regulations that extend the validity of building permits from two to three years. The market needs to calm down and some of the less attractive projects need to be sold out.

Is Warsaw still the most attractive residential market in the country? In what direction will the Warsaw housing market develop?
As a result of a shortage of attractive land available near the city center, other districts on the west bank of the Vistula, mainly southern Mokotów and Wola, have experienced rapid development. The district of Wola has changed a lot, but the stereotype of Wola as an industrial district still persists among the older generation. Fortunately, young people and visitors have no such associations. They appreciate Wola's location and excellent transport connections, including tram lines leading to the center.

As for the east bank, the district of Białołęka has the largest number of standard apartments under construction. Another district with huge potential is Wawer. It still has vacant land available for development and is located relatively close to the center. Regrettably, this district has rather poor infrastructure.

Many luxury apartment buildings have been constructed in Poland over the past year and many more are being planned. Is demand for luxury apartments growing?
Two points are worth making here. First, the luxury apartment market also sees speculative demand from investors, including both businesses and individuals. Second, the term "luxury apartment" has become devalued today in a sense. Some of the projects advertised as luxury apartment buildings in fact have little to do with luxury.

A luxury apartment building has to meet a number of key criteria, including an excellent location, a quiet neighborhood, and an original design. Savings on elegant lobby space, spacious corridors and large elevators are out of the question. The building's surroundings are also important, with at least one park or a green area with a pond nearby. The most exclusive apartment buildings are rarely advertised and distributed through traditional channels. Limiting the number of potential buyers and selecting them is a frequent practice. Not everyone who can afford a deluxe apartment can actually buy one. Residents in luxury buildings do not want just anybody to be their neighbor. In a way, this works along the same lines as an elite club.