Resi-market keeps its balance
ResidentialDevelopers active in the six largest cities in Poland (Warsaw, Kraków, Wrocław, the TriCity, Poznań and Łódź) sold 15,100 apartments in Q2, 8 pct less than the previous quarter. The new supply amounted to 14,900 units over the period, thus maintaining the level of available stock from the previous quarter.
The downward trend in sales of new apartments, although clear, is not as marked in all the cities covered by JLL’s report. Wherever developers have managed to significantly increase the available stock in recent months, the number of deals has also grown. Wrocław is one such example. In Q2 almost 4,000 apartments were put on sale in the city (+36 pct q-o-q), which resulted in a 20 pct increase in sales. The situation in Kraków, where the stock has been at a level similar to that of 2009 for a number of quarters, is completely different. The new supply plunged by 44 pct q-o-q and the number of transactions (2,300) was the worst in 4.5 years. The fall in the number of transactions in Łódź should be looked at differently – although significant (-22 pct q-o-q), it follows from the best aggregate residential sales figure in the history of the city.
The rapid increase in home prices in 2018 and the gradual decline in sales on the largest local markets has encouraged some potential buyers to wait in the hope of a correction. Meanwhile, as the authors of the Residential Market in Poland Q2 2019 report insist, there are still reasons to expect growth. These include the declining supply and developers’ aspirations to maintain liquidity in an increasingly demanding market. The higher prices make it possible to cover the rising costs of construction and land purchases while maintaining acceptable margins.
This may be confirmed by the fact that JLL did not record falling prices on any of the six major markets in the last quarter. In Warsaw, the TriCity and Kraków, prices have already exceeded their historical highs of late 2007, while in Łódź they are gradually approaching such levels. The lowest annual increase in prices was recorded in Poznań and Łódź – on markets where the offer reached a record high level (3 and 6 pct more respectively). In Warsaw, Wrocław, Kraków and the TriCity, prices were 11 pct higher than last year.
“Despite the rising residential prices, Poles can still afford to buy. If we compare the relation of the average price of sqm to the average salary on individual markets, it does not differ significantly from that of 2017. Admittedly, the increase in salaries in Warsaw and the TriCity has been slower than the increase in home prices, but we have still come a long way from the situation in 2009, when in most cities the average salary was only enough to 0.5 sqm,” emphasises Katarzyna Kuniewicz, the director of the residential market research department at JLL.
The authors of the report emphasise that the data for H1 indicate that the most favourable scenario for the development sector, a fairly moderate slowdown, is taking place, but the balance between the number of units put on for sale and sold is being maintained.
“This balance could be disturbed by the outflow of investment buyers due to a deterioration in the profitability of investing in rental housing. There may be several reasons for this. It is inevitable that there will be a large number of units purchased in the next few years intended for renting. Furthermore, possible restrictions or new regulations imposed on short-term rental do pose a threat to this sector. Rapid inflation growth, leading to interest rates hikes, might put fuel to the fire. Along with investors, it would hit the buyers financing the loan purchase,” comments Kazimierz Kirejczyk, a deputy CEO of JLL.
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