A summer correction

The mood of investors clearly soured in August, when a reluctance to buy shares set in. The indices in Europe and the US lost around 1–3 pct, and it was in this context that the Warsaw trading floor fared rather badly. Despite relatively good Q2 company results in the US, hopes of a quick turnaround of the interest rate hikes receded into the distance. Investors had no obvious reason to buy, even being stimulated by their faith in AI just a few weeks ago. The warning signs continued to flash, with the state of the Chinese economy being of particular concern to investors and analysts. Its projected 2023 growth rate of 5 pct now seems unlikely after the publication of the figures for July – and for China such growth is meagre indeed. Each of the drivers of the Chinese economy was idling over in July, including retail sales, investment and industrial production. And weaker imports and exports have been the result. The US economy has actually been doing really rather well; Germany looks a little worse, while in Poland the hard data points to a slowdown between April and June with GDP falling quarter-on-quarter, confirming the trend seen in Q1 that Poland is heading towards a technical recession.

Happily, the economic trade winds are not being reflected by the residential development sector. The launch of the subsidised mortgage scheme and the ever-more likely end to the cycle of rising interest rates (which could even be lowered) have significantly boosted sales. In July, Poland’s largest cities saw double the home sales of the previous year (according to Otodom Analytics), while the number of mortgage applications shot up by almost 100 pct. As a result, the number and the total value of mortgages granted in 2023 might come in close to what was seen in 2022 (126,000 mortgages worth close to PLN 44 bln). However, it is worth pointing out that even this is 50 pct below the record set in 2021.

The increased demand has been encouraging developers to launch new projects – especially in locations that meet the criteria for subsidised mortgages – and has also resulted in rising prices, which due to a slowdown in production are set to rise further for the next few months. Dom Development has announced a market offensive and, on the publication of its half-year results, has also disclosed some intriguing market data on the constantly rising numbers of those buying homes with mortgages. This figure rose from 30 pct in Q2 2022 to 46 pct in Q2 2023. The developer has declared that with financing and the slight limitation in construction, it should be able to respond to the rising demand by taking advantage of both the stabilised construction costs and the land bank that it has added to over the last few weeks. The company’s profits over the last six months are down on a year ago, with 8 pct fewer units handed over. Deloitte has published an interesting report on the Polish residential market, according to which in terms of numbers of projects launched, Poland is only being surpassed by France and Germany – and the statistics still look good when it comes to the number of projects launched per 1,000 inhabitants. However, in terms of the ability to buy, Poland finds itself in the middle of the pack, but above Slovakia and the Czech Republic. The most affordable homes are to be found in Belgium and Norway.

For the construction sector, at the macro-economic level we are still seeing declining construction and installation production. The data for July was weaker than expected and only slightly better than in July 2022, but worse month-on-month. Economists have not been seeing any signs of a recovery, even though the results published by constructors have often been better than those seen in 2022 (such as those of Mostostal Warszawa, which has so far only released its preliminary figures), or even quite good (e.g. Polimex Mostostal), given the demanding current conditions. (Mir)