Concrete proposals

Land is gradually becoming more valuable than gold, so naturally it should be held in banks; but developers are increasingly sceptical about offers to buy plots and often give a hard ‘no’ to selling them

Residential market tycoons have recently been cramming themselves with data on how large their land banks are, or rather how many square metres of apartments can be developed on them (PUM for short), for such is the developer’s way of looking at plots. J.W. Construction, said to be the largest developer, declares he has land (300,000 sqm) on which 6,500 flats can be built, while Dom Developer, the second biggest, claims it owns land on which 6,000 flats and homes can be built with a total of 460,000 sqm PUM. The bank also contains land on which almost another 3,000 may be built, while the acquisition of additional land on which 6,500 apartments could be developed is currently being negotiated

PUM waiting to pounce

The Polnord company intends to become the Polish residential market leader, according to its management’s plans, linking its forces with NFI Progess and Zachodni FI in May. By taking over the portfolio of this fund’s projects, Polnord can also claim it holds a land bank allowing 1.7 mln sqm of living and utility space to be built (including around 10,000 apartments).

Anna Kwiatkowska, head of Cushman & Wakefield’s residential section, believes that: “Such take-overs on the housing market are still unusual events, but will take place more frequently, especially since a real demand exists to obtain land. It is becoming easier and faster to purchase a company than a plot, thereby becoming the owner of attractive land.” Companies are now operating on the market which have become housing developers in a matter of days, advertising the purchase of a parcel or specifying land which can be constructed on in a firm’s resources, for instance by implementing an apartment building project. Such ‘developers’ are a tasty tit-bit for other developers who have the sufficient know-how and facilities to efficiently carry out a project.

Anna Kwiatkowska explains: “Land development which civilised land trading has never yet been on such a scale. It is process preparing land for investment with the purpose of obtaining conditions of construction or a building licence. Such a ready product commands a much higher price on the market.”

No agricultural land

Mariusz Motty, owner and president of the Warsaw-based Kancelaria Motty, claims: “The largest suppliers of land are, however, private individuals who often have no idea of the value of the jewels they hold.”

He stresses that the supply of land on the Warsaw market could soon increase noticeably.

Mariusz Motty enumerates: “The bill amending the Spatial Development and Planning Act, approved by government envisages the simplification and abbreviation of planning procedures. The outcome is that several thousand hectares of Warsaw land will be included in local development plans. Some railway land could also be put on the market. The possibility of legally excluding agricultural land from being within Warsaw city administration borders is also under review.”

The list of housing development locations will be added to by land whose designation during studies and directives on Warsaw spatial planning were changed from industrial to housing. Mention could also be made of land around the Racecourse and also so-called ‘industrial’ Żoliborz and Odolany. Developers are buying these plots like hot cakes.

Costs still high

One of the first companies to begin operations in the area of the Wola district around ul. Jana Kazimierza is BPH Real Estate, a subsidiary of BPH bank set up too undertake housing projects.

Zbigniew Sajdak, BPH Real Estate vice-president of the board remarks: “I would say the market is gradually calming down. Last year especially witnessed land price uplifting, often by agents. Per square metre land prices even reached PLN 3,000 PUM, which is surely the maximum possible. Higher rates may be accepted but only for particularly attractive plots. In my opinion present and future parcel prices will be held back by rising costs of building materials and labour.”

It cost somewhat over PLN 7,800 to buy one sqm for your flat in Warsaw in January 2007 which rose to just a bit more than PLN 8,000 in April (RedNet Property Consulting data). The fever which Warsaw and Kraków faced last year shifted to Poznań, the TriCity and Łódź which are trailing behind the Warsaw average.

Łukasz Madej, Home Broker’s vice-president, adds that: “Development plot prices first started to spiral upwards on Poland’s entry to the EU. They increased by even several hundred percent, but is extremely difficult to define average prices since every plot is different – not only as regards location, but also over their legal status and whether they are ready for development. In recent weeks, when house prices stopped climbing from week to week, a cooler approach by developers to potential purchases became evident. I know of cases where a developer has said ‘no’ and the disgruntled seller has to move on.”

Łukasz Madej is sure last year’s tenders will not be repeated, when Spanish developers wanting to enter the Polish market were willing to pay any price, to the astonishment of Polish companies.

Price fireworks display

Mariusz Motty is sure land prices are bound to rise: “We have set out on the road of economic growth, so house prices are also bound to rise. No one today will surely be surprised that the contribution to the price of 1 sqm of land for a flat amounts to PLN 2 and even 3,000. Taking Mokotow as an example, where the price of a square metre for a plot reached PLN 12,000 near South Station. It is difficult to set average prices, but I do feel that the rate at which prices will rise this year will be corrected to 30 pct in Warsaw and its surrounding area.”

The owner of Kancelaria Motty stresses that developers are presently trying to get their hands on locations near Warsaw, e.g. to the south (Piaseczno, Konstancin-Jeziorna and even Góra Kalwaria) and also in the north-western strip (Legionowo, Łomianki and Ożarów Mazowiecki).

Zbigniew Sajdak takes a more cautious approach. and remarks: ”In my opinion, land price rises in 2007 may be initially estimated at 10 to 20 pct. When the prices of ready flats are constant, production costs are a factor restricting sudden prices rises. The cost of erecting one square metre of a flat wandered, after all, from PLN 2,400 to PLN 4,500.”

He thinks a large rise will occur for land to be used for single-family house development around larger cities. Price fireworks can also be expected for attractive parcels in city centres. The huge prices paid for land are not limited to Warsaw alone with ‘super-opportunities’ also being picked up when buying excellent plots in other large cities.

In short, it seems that years of enormous effort will have to be spent by developers on breaking land banks.