Priced out of the market

Probably no one expected residential developers to begin the year with such a flourish. According to Statistics Poland, construction work was launched on almost 41,000 new homes – the highest figure ever recorded in Poland. Even the figures for the beginning of 2021 were lower, when new construction was being fuelled by record cheap loans.

Polish cities vying with each other

Clearly, this year’s activity cannot be explained in a similar manner, with Statistics Poland recording rises in six of Poland’s seven largest cities. (Warsaw saw a 12 pct fall in the number of construction launches.) Łódź stands out in particular, with developers launching construction work on 4,200 units in the first quarter, which is not much less than the figure for the entire previous year. Statistics Poland also points to a big increase in activity in Wrocław, Kraków and Katowice, while in the Tricity and in Poznań the rise can be traced back to the previous year.

However, from the buyers’ point of view, it’s not only the number of apartment projects launched in the big cities that’s important, but also the number that are on sale. According to Data RynekPierwotny.pl, a total of 23,600 new apartments came onto the market over the first four months of the year. Compared to the same period of the previous year, the new supply was up by as much as 120 pct.

As a result, the number of apartments on sale has risen – at the end of April, home buyers had almost 51,000 offers to choose from, 3 pct more than last year, even though in Warsaw, Kraków, Wrocław and the Tricity developers have still not brought the numbers back up to what they were last year. Nonetheless, in comparison to the end of last year, the number of units on sale rose significantly in Wrocław, by 36 pct, and in Poznań by 32 pct. In the Tricity, the number of homes on sale rose by 28 pct and in Warsaw by 18 pct.

However, it needs to be stated here that in April developers clearly reduced the supply, with Wrocław being the exception, where twice as many apartments were put up on sale than in the previous month – and it is very likely that it was this large pool of units appearing on the market that resulted in developers in Wrocław being the only ones to increase their sales in April. In other cities, the sales figures shrank markedly. According to Big Data RynekPierwotny.pl, new home sales in Łódź suffered a 74 pct fall in April. The last time such similarly weak figures were recorded in this city was in August 2022, during the collapse of the mortgage market.

Mortgages not so secure?

Of course, it was foreseeable that the suspension of the 2 pct Secured Loan programme would initially result in a fall in demand for apartments, but this was not evident in January and February. This was because many contracts had been signed with those who benefited from the scheme but had to wait up to two months for their mortgages to be approved by the banks. Nonetheless, by April the boost provided by the Secured Loan programme was exhausted. The announcement of the new #naStart mortgage programme might encourage potential apartment buyers to put their purchases off until such loans are offered by the banks.

No end in sight for price rises

But the combination of these two factors on their own is not enough to explain the slump in sales recorded in April across most of Poland’s cities. The problem is that most of the prices for the apartments offered by developers are already extraordinarily high. Those who were waiting for prices to stabilise have certainly been disappointed. Meanwhile, the beginning of the year saw further price rises. In April, Poznań was the leader in this regard, where since the beginning of the year the average price per sqm for a new home rose by 7 pct, which is more than in any other city.

Warsaw and Łódź are also at the front of the price rise race, with average price rises close to 5 pct per sqm. In Kraków, the average rise over the last four months has been 4 pct, while in Wrocław it is 3 pct, and in the cities that make up the Upper Silesian metropolitan area the rise has been just 1 pct. Only in the Tricity are the average prices per sqm the same as they were in December last year, but that of course doesn’t mean that such a situation is going to continue over the coming months. Prices can change rapidly. Over the period of a month, average prices can go up or down depending on whether cheaper or more expensive homes are added to the pool of those on offer for any given market. In the Tricity, for example, the average price of apartments that developers put on sale came to PLN 12,200 per sqm, which was far below the average price of PLN 15,000 per sqm of all those on sale. As a result, prices have stabilised.

Warsaw also saw the average price per sqm stay at the same level of the previous month, while in Poznań prices have been heading steadily upwards this year. In April alone, average prices per sqm rose by 3 pct to stand at more than PLN 13,000. The situation in this city, however, is unusual, with the demand as recorded by Big Data RynekPierwotny.pl falling this year from 13 pct to 5 pct. This index is often a marker of the market overheating, since it shows the percentage of homes being sold by developers in relation to everything they have on offer. The higher this figure is, the quicker apartments are selling out – and the greater the risk that prices will rise. On the other hand, when the figure falls, the price pressure also drops. As can be seen in in Poznań, the situation for new home buyers is particularly favourable, but developers have obviously concluded that they can still raise their prices and the coming months will show if buyers are prepared to accept this.

Developers in Kraków are also targeting the more affluent. The average price of the homes they put on sale in April was PLN 18,100 per sqm. In effect, the city has seen apartments priced at less than PLN 10,000, and even though you can still find such properties in Warsaw, seeking them out has become quite a challenge. The proportion of such apartments is also shrinking fast in other cities. For example, they have gone down from 14 pct to 5 pct of the market in Wrocław over just four months.

In Łódź and Upper Silesia, it’s still easy to find such flats, as the prices there are no higher than PLN 9,000 per sqm. But who knows if they will still be available in a year’s time – since the proportion of such homes has shrunk from 32 pct to 23 pct and the percentage of those priced at over PLN 12,000 per sqm has risen from 15 pct to 29 pct?

Keeping discounts well-hidden

Unfortunately, we have to accept that the prices of homes put on sale are going to continue to rise due to the rising costs of construction. On the other hand, there is a chance that a larger proportion of the units on sale will be in the popular segment for customers who pay with mortgages. Furthermore, the greater competition on the market could force some developers to introduce hidden discounts that do not change the book price, but such promotions are more likely in less popular locations.