Mass product

Analysts estimate that the boom in the residential market will last for the next few years, and will not be restricted to the biggest Polish urban centres, but also extend to smaller towns and cities, as well as to poorer regions. A flat of one\\\'s own is no longer a luxury product enjoyed by only the most affluent people. The affordability of mortgages has almost led to flats becoming a mass product

A recent survey of the residential market has once more shown that the demand for flats is growing and clearly exceeds the supply. Developers want to build more, but their activities are often hindered by the unavailability of plots covered by land development plans or - at least - valid decision on outline building conditions (WZiZT). Warsaw remains the number one city on the residential map of Poland.

Warsaw the leader
Warsaw accounts for over 25 pct of all flats built and sold in Poland. According to the \\\'Warsaw Residential Market\\\' report by specialists Reas Konsulting, there are 4 other markets that when combined are comparable to Warsaw in terms of the number of homes being built: Kraków, Tri-City, Wrocław and Poznań. Due to having higher prices, the value of Warsaw\\\'s market is several times more than that for each of these other markets.
In 2005, 14,700 new dwellings were handed over for use, which is 42.7 pct more than in 2004 and about 1,500 less than in the record year of 2001. About 10,700 homes were built by developmers, which have successively increased their market share every year, at the expense of housing cooperatives.
Based on data for the number of construction permits issued and flats whose construction began in 2004 and 2005, Reas\\\' specialists estimate that the number of homes handed over for use will still be on the rise in 2006 and 2007. Although in the past few years most abodes were built in the districts of Białołęka (3,600 in 2003) and Ursynów (2,500), 2005-2006 are the boom years for Mokotów. This district is followed by Białołęka and Bemowo, while Ursynów is now in fourth place competing with Wilanów, where many new flats are under construction.
According to a survey of potential customers\\\' preferences conducted by Reas, the activities of the developers responsible for the projects above are well-targeted. Those interested in buying flats choose Mokotów (32 pct) and Ursynów (29 pct). Districts considered as relatively attractive include Bemowo (23 pct) and Ochota (18 pct). Next on the list of the survey\\\'s participants were Białołęka (16 pct), Wola (14 pct), Żoliborz (13 pct), Ursus (12 pct), Wilanów and Bielany (11 pct), Targówek (10 pct) and Praga Południe (6 pct).

Varsovians optimistic
Mortgages at low interest rates and attractive loan conditions, combined with the low unemployment rate and the optimism over future standards of living, are the factors encouraging many to buy their own homes. The demand is generated to a considerable extent by young people from the provinces who are ready to take the risk of going into debt, determined to have their own homes and optimistic about the future. Also playing an important role here - especially in the segment of high-quality apartments - are medium- and long-term investment demand and speculative demand. As Reas\\\' research findings show, deals of these two kinds make up respectively 15-20 and 40 pct of the market.

Unafraid of price increases
The prices of homes in Warsaw have been growing continuously since mid-2003. According to Reas\\\' estimates, the annual growth rate for the capital city is 15-16 pct, and in the second half of 2005, prices increased by 8 pct. The prices of apartments are going up much faster than salaries.
Assuming that the 7 pct VAT rate for flats is maintained until at least 2011 (the threat of the introduction of a 22 pct rate in 2008 has receded now), further growth in demand will be based on demographic factors and investment purchases. According to Reas Konsulting\\\'s specialists, in 2006 and 2007 demand will still exceed supply, although in the second half of this year and in the next year, Warsaw\\\'s market will witness new projects and flats purchased for investment purposes put on sale. This should balance the situation and prevent further increases in prices until 2008, when developers will enter the scene once again.

Warsaw\\\'s problemsin Kraków
The second most dynamically developing residential market is Kraków. According to data from a survey by Knight Frank, in 2005 around 2,900 flats were handed over for use. At the end of last year about 4,500 flats were under construction, of which 86 pct will be finished this year.
Companies operating in Kraków\\\'s housing market encounter the same problems experienced by firms in Warsaw: the unavailability of plots with land development plans and administrative procedures dragging on interminably. However, developers from Kraków can also see the same positive trends emerging as their Warsaw counterparts: demand from individual customers and investors leading to an increase in flat prices. Furthermore, the demand is likely to soar as job opportunities grow in the city for young people from other regions.

100,000 new jobs in Wrocław
Knight Frank has also surveyed the residential market in Wrocław - another city experiencing the boom. According to the research findings presented in the \\\'The Residential Market 2006\\\' report, last year the construction of more than 3,100 flats got under way in the Lower Silesian city, which is 70 pct more than in the previous year. The new projects for the first time include high-quality apartments. 
Wrocław is now competing with Warsaw in terms of annual apartment value growth. Specialists estimate that throughout  2005 this ranged from 10 to 15 pct. According to forecasts, the trend should continue into the near future, as in Wrocław and the surrounding region 100,000 new jobs will be created within the next 4-5 years. Some of these newly employed people are certain to buy their own flats.

Two important factors
Poles want to buy flats, the government is talking up the action it has taken to support the trend (eg. its determination to maintain the 7 pct VAT rate), and developers are eager to begin new residential buildings. It seems that all the requirements necessary for the residential market to flourish are in place. However, there are also two key prerequisites to be met, namely a favourable tax policy, and for the economy of the country to be in a healthy condition to ensure the availability of credit and a high level of consumer optimism. 

Magda Konstantynowicz