The light in the window

There has been no shortage over the last three years of unexpected events that have brought serious disruption to the residential sector. However, signs of a possible return to normality could be discerned at the end of 2022. “After the temporary slump in sales in Q2 2020 brought on by the pandemic, the market sentiment quickly improved. The number of new units subsequently sold was the highest on record for the Polish market. The following year brought with it a further change in the situation, resulting in another slump in home purchases in mid-2022. Soaring inflation, the war in the east, and the dire situation on the mortgage market resulted in demand slowing. In Q1 2023, nevertheless, we’ve already seen a completely different level of sales. Buyers, who up until now had just been watching what was happening, have returned,” claims Aleksandra Gawrońska, a director and the head of residential research at JLL. As the results of the leading Polish developers show for Q1 2023, sellers have been given added hope of actually making a profit and a period of relative stability, making it worthwhile for investors to take an interest in the sector once again.

Ronson beats the field

From the Q1 data, the first three months of the year were definitely owned by Ronson Development. Over the period, it handed over 44 apartments and signed sales contracts for 233, which represents an impressive growth in sales of 135 pct over the year. Even in comparison with the previous best quarter of Q4 2022, this is still an increase of 50 pct. “We are seeing the market bounce back and we expect this trend to continue, so that Q2 2023 will bring even more positive results. In line with our plans, we have started to build the next stage of Ursus Centralny in Warsaw, which will comprise 280 apartments, as well as the seventh stage of Miasto Moje in the city’s Żerań district with 243 apartments,” reveals Boaz Haim, the CEO of Ronson Development. The most popular apartments the developer has been selling have turned out to be two-room flats. The developer’s recent success could be seen as a sign of an improvement in the market, but analysts are warning that we cannot be overly optimistic. “The number of units that developers brought to market in Q1 2023 came to no more than 6,900. Similar numbers were seen in the two previous quarters. It is clearly evident that developers are still being careful, while another important point to make is that there is much less flexibility in the supply than in the demand. There are now more buyers, so we simply have to wait for this demand to manifest itself,” explains Aleksandra Gawrońska of JLL. The CEO of Ronson, however, is putting his faith in those who are looking to invest their savings in apartments. “Buyers understand all too well that real estate purchases protect the value of their investment, particularly in times of high inflation. This can be seen in the current increased demand, for which we are now already providing the supply,” argues Boaz Haim.

Lokum the runner-up

Lokum Development’s recent performance is also deserving of praise. The company, which operates in Małopolska and Lower Silesia, saw a rise in sales of 114 pct in the last quarter (156 units compared to 73 in the same period last year). Among the apartments sold under developer-state and pre-sale agreements, 80 were in Wrocław while 76 were in Kraków. “Over the first quarter, we’ve been increasingly seeing as a clear trend that potential buyers are emerging for new apartments bought through mortgages. This has a lot to do with interest rates stabilising and the Polish Financial Supervision Authority (KNF) relaxing the requirements for assessing creditworthiness. The government’s ‘Safe 2 pct Credit’ scheme has also helped to boost the activity on the market, not only from buyers able to take advantage of it, but also from those who cannot. These people are now bringing forward their purchasing plans so that they can complete them before those who benefit from the programme come onto the market. As a result, the number of available apartments will be much reduced and prices will go up,” admits Bartosz Kuźniar, the CEO of Lokum Developer. The KNF previously required banks to add a 5 pct safety margin to their loans, which in practice limited the ability of many people to buy apartments through mortgages. Aleksandra Gawrońska agrees that the promised governmental support could turn out to be the light at the end of the tunnel for buyers, or at least for one group of them. “You can divide up buyers by how they finance the transaction – and in this case, it’s those who buy with mortgages that have been the most affected. The safety margins have been relaxed for loans with fixed interest rates over set periods and a government programme is being prepared for first-time buyers. Just the announcement on its own has energised the remaining pool of potential buyers, who have brought their purchasing decisions forward over the last quarter. The main reason for this was the fear of a shortage of available homes to buy and potential price rises,” the JLL director explains.

At the end of March 2023, Lokum had 591 apartments for sale, 271 of which were ready to be handed over, while another 320 units are scheduled for completion this year. Construction at the end of Q1 was underway for another 696 apartments. The developer also declares that it has a land bank of 80 ha, which it estimates is enough for it to build 12,600 units. In the light of such plans, the question arises of who is going to buy up the apartments on offer and why. According to Aleksandra Gawrońska, there are two different groups of buyers involved. “Individual buyers are making purchases to meet different needs. For some this is their first home, while others are thinking of improving their living conditions. You could assume that these groups are buying apartments to live in them. Another group are those who treat their purchases as an investment in order to rent them out or rest their capital in them. Each one of these groups felt a great deal of uncertainty over the last quarter due to the economy and the geopolitical situation,” she points out.

The big players put the brakes on

Other companies registered more modest, two-figure growths in sales – including Marvipol (60 pct), Dekpol (33 pct) and Robyg (23 pct). Wikana put in the worst performance, with 38 apartments sold compared to 86 in the same quarter of the previous year. Another listed developer that did almost as badly was Echo-Archicom, which suffered a fall in sales of 47 pct y-o-y, with 374 units sold, of which 116 were in Echo Investment’s own projects while 258 were in Archicom’s. Nevertheless, Echo managed to finish Q1 2022 with a total of 703 apartments sold. “The Q1 sales figures were due to the small number of apartments on offer at the time by Echo. We currently have over 1,200 apartments on offer and in 2023 we are planning to develop around 2,500 more. As a result, we expect a significant increase in sales compared to last year,” claims Nicklas Lindberg, the CEO of Echo Investment. In third-last place was Atal, who in the first three months of the year sold 46 pct fewer apartments – 406, compared to 754 a year earlier. The company also believes that buyers are going to show more interest in what it is offering. “We expect that from the spring, due to such factors as the relaxed banking rules in regard to mortgages and the newly announced governmental support programme, more contracts will be signed than before,” predicts Zbigniew Juroszek, the CEO of Atal.

With a little help from our friends in high places

Evidently, analysts and developers are placing a lot of their hopes in government programmes to support borrowing and counteract inflation. Stability is still being put at risk by the financing environment for developments, and so the residential markets of the largest Polish cities are still far from being rosy. “Warsaw, Kraków and Wrocław are in the worst states. The homes on offer in these three cities have shrunk in number quite considerably. If, over the coming months, developers do not replenish them, the market will quite soon tip over from being demand-led to being supply-led. The financing available for new projects could also be a barrier for developers, particularly when it comes to launching construction phases. Interest rates are still high, and this means that investment financing is also much more expensive than it was a few years ago,” concludes Aleksandra Gawrońska.