In the largest cities, the availability of new apartments is dwindling, and the ones that remain are getting pricier. Experts from RynekPierwotny.pl and GetHome.pl have investigated whether there’s a chance this trend could reverse within the year.
“It’s hard to be optimistic about this, as the high sales rate of new apartments has not been matched by an appropriate influx of new ones to replenish the developer’s offerings,” admits Marek Wielgo, an expert from RynekPierwotny.pl and GetHome.pl. As a result, the available options have shrunk dramatically. This decrease is the main cause of the rapidly rising average price per square meter. With more people seeking mortgages and the “Safe 2% Loan” becoming increasingly popular, the cheapest units vanish from developers’ listings first, pushing up the average price.
“I’d like to believe that in the coming months, the average might cease to rise or even drop slightly. For that to happen, developers would need to significantly boost the housing supply, especially for the credit market segment,” says Marek Wielgo. However, the likelihood of this hinges not only on demand for new apartments in the coming months but also on the capabilities of property developers. Specifically, whether they have the necessary construction permits to kickstart new projects swiftly.
RynekPierwotny.pl and GetHome.pl examined ten metropolises where developer activity has been highest over the past three years. According to GUS (Central Statistical Office) construction statistics, the number of started housing units in these cities over the past three years was less than the number with building permits. For instance, there was a difference of over 8,900 units in Poznań and nearly 8,200 in Warsaw.
This is largely due to last year’s slump in the housing loan market. By the end of last year, developers were significantly reducing the number of housing starts. But how’s the housing market looking after eight months this year? Warsaw developers have begun more housing units than the previous year, and there’s also a rise in developer activity in Łódź, Wrocław, Katowice, and Lublin. Sadly, in the remaining five metropolises, developer activity has slowed even more drastically, with the number of housing starts in Szczecin, Poznań, and the Tricity area shrinking by over 50%!
Worse still, in most metropolises, developers have obtained fewer construction permits in the first eight months of this year compared to the same period last year, with Łódź and Rzeszów being exceptions. The largest decline was in Warsaw, where housing covered by building permits fell by 47%.
Still, in all metropolises, including Warsaw, Wrocław, and Lublin, developers have a surplus of apartments for which they have obtained building permits but haven’t started construction. Moreover, the mere formal initiation of a project doesn’t indicate ongoing construction or that the planned units have been added to a developer’s offerings. Building permits remain valid for three years, and developers get an additional three years after initiating construction if they halt it.
The question remains: when will developers “thaw” their investments, including the “initiated” ones? And can this happen this year? It’s worth noting that rising construction costs no longer keep developers awake at night. On the other hand, they need to be convinced that the surge in housing demand isn’t fleeting. Remember, this demand accumulated over the past several months due to a dramatic drop in housing loan availability. Although it improved significantly this year, the looming risk of inflation remains a concern for many economists. Without optimism about economic development, expecting a sharp rise in developer activity might be too hopeful.
“The boost from the ‘Safe 2% Loan’ alone clearly isn’t enough. Especially since the loan program might be halted in a few months when the funds allocated in next year’s budget for the ‘Safe 2% Loan’ incentives run out,” comments Marek Wielgo.
Large property developers are likely to commence constructions in major metropolises as they have land banks and access to financing. This is evident from August data from the Central Statistical Office in cities like Warsaw, Krakow, Łódź, Rzeszów, and Poznań. Smaller and medium-sized developers are in a trickier position. Many of them operate primarily in local markets. Until the economic situation becomes clearer, banks may be hesitant to finance projects in these areas.
