Optimism rebounds for lenders

JLL has just published its Q2 2023 residential report, according to which home sales across Poland have risen to the same level last seen in 2021. How come?

Aleksandra Gawrońska, the head of residential research, JLL: There has indeed been a very clear rise in sales. Across the six largest markets, developers sold almost 15,500 homes – a figure comparable to the second half of 2021. You have to bear in mind that over 2022 many unforeseen events occurred, such as the war in Ukraine, soaring inflation and the interest rate hikes. All of this resulted in a fall-off in sales. Now, those people who held back with their decisions to buy homes because of these factors have returned and this is being hastened by the awareness of the continuing price growth and of the shrinking number of units on sale.

Did anything else happen to trigger this bounce-back?

Certainly, greater impetus was added to this trend by the announcement of the latest governmental incentive scheme, but the rate of sales is not only being driven by those who have qualified for the Safe 2 Percent Loan programme. Prices started rising and in some markets there were fewer and fewer new homes available. Since potential buyers who intended to take advantage of the subsidy scheme were looking around carefully in Q1, some developers already had development contracts and reservations signed by Q2. I should also mention that there was greater optimism on the mortgage market. At the beginning of February, the safety buffer was removed, which provided new opportunities to those buyers who had improved their credit ratings and could, as a result, opt to take out a mortgage on commercial terms.

Would you say that in the second half of the year, it will be those using the Safe Loan scheme who will drive the market?

A substantial section of the demand is definitely going to be made up by those buyers who will be using this programme. This group could even account for the largest share of the sales in Q3 this year. The programme started on July 3rd and by the end of that month the scheme had already received almost 12,000 applications. This just shows the level of the demand and developers are sure to target what they offer to this group. But you have to remember that this group is not dominating the market. In the six largest Polish cities, the demand is also going to be supported by commercial mortgages as well as by those buying as an investment or for their own needs.

Your report also reveals a large gap between the prices of units sold and those on sale. In Warsaw, this comes to about PLN 1,600 per sqm. Why is this?

Over the last few months, there has been a big change in the structure of what’s on sale. When the mortgage market froze in 2022, the units that came onto the market were targeted at wealthier buyers and to a large extent comprised high-standard suites and apartments. In H1 2023, developers brought cheaper product onto the market for buyers with mortgages and then both the purchaser activity and the number of reservations significantly increased. What remained on sale were the more expensive homes, while the prices of units sold increasingly reflected those who were buying with mortgages.

Is the fear that prices are going to rise dramatically in the near future having any influence on home-buying decisions?

When it comes to the residential market, you always have to remember that the decision to buy is always an individual choice and depends on many factors. What’s happening now with prices will hasten purchasing decisions. Construction and development costs, even if they level out, are definitely not going to fall. And the average new home price rose during the last quarter by 4–5 pct. What we are seeing in the largest cities is a massive reduction in the number of units on sale. So, due to this we can expect further rises and probably going to be much greater than those we’ve seen so far.

What state is the PRS market in? For the last few years, it seems it hasn’t had the conditions necessary for growth.

Indeed, this market has slowed down. The Ukraine war and the high costs of financing have indirectly thrown the market into turmoil, discouraging some operators from coming to Poland. PRS is still growing, but in a rather different way. The time of the rental platform has now come – projects developed by JVs. Single-building purchases for rental will become less common. The window that opened up last year for such transactions has now closed again. Faced with renewed demand, developers are again targeting individual purchasers. However, projects planned earlier are still going ahead and the largest players are slowly bringing their product to the market.

Have you managed to fit a summer break into your busy schedule?

Yes. Even though the summer is normally a time for me to get to know new places, this time – for a change – me and my family are going to Ostrowa on the Polish seaside. This is a small town near Karwia in Pomerania. This year we have already managed to do some travelling, so we are planning to take a rest, do some walking and play board games.

Interview: Julia Cudowska