Supply and Demand in the Polish Residential Market

Transcription

1 Residential market in Poland Q2 28

2 Supply 2 In the first half of 28 an inversion in the supply-demand dynamic was witnessed in the Polish residential market. Throughout the recent period of prosperity in Polish residential market demand for apartments significantly exceeded the level of supply, while currently it remains at relatively low level. At the same time, major changes on supply side have been noted in recent months. In the second quarter of 28 the number of units being marketed in the prime market has reached record levels, with 16,6 apartments in, 7,65 apartments in, 5,3 apartments in, 3,5 apartments in and 2,4 apartments in. The availability of completed units, or units with completion scheduled within next 9 months, has increased markedly in the prime market. In the first quarter of 27 the proportion of units which had completed in the total number of marketed apartments was less than 1%, while currently it varies between 4% and 8%, depending on the city. Number of completed prime apartments, or with completion planned within next 9 months Number of apartments offered on the prime market in major Polish cities* Q1 26 Q1 27 Q1 28 Q2 28 * - completed, under construction and planned units offered by developers Q apartments completed in sale Q apartments completed in sale Q apartments for sale which completion is due within 9 months Q apartments for sale which completion is due within 9 months

3 Prices 3 As a result of the declining rate of absorption and the increasing number of units available on the prime market, developers have postponed the commencement of new schemes as well as planned additional phases of multi-stage projects. In regional cities the number of apartments which began construction in the first half of the year was lower than in the same period of 27. However, in, the number of apartments commencing construction in the first half of 28 remains at a similar level to that recorded in the first half of 27. In the second quarter of 28 price fluctuations have been noted in the Polish residential market. Average apartment prices stood at similar or slightly lower levels than in the first quarter of 28 with the exception of higher standard units where slight increase have been recorded. Trends currently being observed in the prime residential market, such as the low absorption rate and increasing supply, are behind the price correction being witnessed. In the second quarter of 28 in addition to promotions such as finishings and the inclusion of parking spaces at no additional cost, developers have been willing to decrease or negotiate on prices. However, over the same period some projects saw price increases. Prime apartment construction commencements H1 27 vs. H First half of 27 First half of 28 Restaura Kameralna, Wola,

4 4 City Average net apartment prices (VAT excluding) in Q2 28 Percentage of units from particular segment in the market offer LOW STANDARD APATRMENTS 71% 66% 64% 74% 62% MEDIUM STANDARD APARTMENTS 24% 27% 22% 12% 25% HIGH STANDARD APARTMENTS 5% (74 units) 7% (455 units) 14% (321 units) 14% (735 units) 13% (636 units) Average net prices (PLN/sq m) The most visible changes in asking prices during the last three months took place in, where in 71 out of 274 projects asking prices were reduced, but prices were increased in 41 projects. Price fluctuations have been also observed in and. In the Małopolska capital apartment prices have risen in 21 of 169 schemes on the market while in 2 projects prices have declined. In prices rose in 14 of 86 schemes and decreased in 16 projects. The initial asking prices and level of interest from potential buyers were the key elements influencing pricing trends. Average asking apartments prices in selected Polish cities in Q2 28 (PLN/sq m) 1% % 2% 4% 6% 8% 1% < Willa Księcia Witolda, Stare Miasto,

5 Demand 5 Small prices drop noted currently in the Polish residential markets indicating the sector going through the maturating process. After the correction the prices stabilisation is expected. In and the majority of apartments fall within the PLN 4, to 6,/sq m range, while in and they are PLN 6, to 8,/sq m. In contrast to other cities, units in don t exceed PLN 12,/sq m. In the majority of apartments (74%) are listed between PLN 6, and 1,/sq m. The drop in demand for owner-occupation in the second half of 27 has converted into an increase in demand in the rental market. Therefore, in the first half of the current year a significant growth in letting levels has been noted. The high cost of buying accommodation has encouraged customers to reconsider their decision to purchase, this trend however does not translate yet into the number of apartments sold. As illustrated below, in major regional cities only several hundred units have been sold (from some 3 apartments in to nearly 8 units in ) and just 2, apartments in during the second quarter of 28. Number of units available at the end of Q1 28 vs. number of units sold throughout Q Number of units available in Q1 28 Number of units available in Q1 28 Patrick s Homes, Wilanów,

6 Developers 6 In the second quarter of 28 purchasers withdrawing from package transactions added to developers offer. A fall in number of investment purchases is a sign of a market gradual stabilisation. The personal income of many potential buyers is not sufficient to obtain a mortgage loan in Swiss Francs. Moreover a fear of exchange rate risk related to loans in foreign currencies has led to an increase in PLN denominated loans, which has negatively influenced demand. In June 28 the Monetary Council raised interest rates by.25% to stand at 6%. High inflation indicates that the possibility of further increases in interest rates should not be excluded. The slow down in the residential market has prompted developers that purchased expensive plots during the boom in residential market, to delay the commencement of new projects. Currently new residential schemes are developed mainly by the most active players who own banks of land or companies which bought plots before prices increased in residential market and can afford to adjust their financial returns to the market conditions. Some developers are considering changing sites designated use from residential to commercial purposes if allowed by the planning authorities. Cost of mortgage in selected currencies (September 27 June 28)* points IX X XI XII I II III IV V VI CHF PLN EUR USD * - indicator for a mortgage of PLN 25, for 3 years (1 point = PLN 1,) Source: Rzeczpospolita Arlet House, Ochota,

7 Contact in Poland +48 (22) Research Residential Consultancy Magdalena Czempińska magdalena.czempinska@pl.knightfrank.com Corporate Finance & Advisory Bogumił Rutkowski bogumil.rutkowski@pl.knightfrank.com Jolanta Olszewska jolanta.olszewska@pl.knightfrank.com Piotr Górecki piotr.gorecki@pl.knightfrank.com Elżbieta Kaczorek elzbieta.kaczorek@pl.knightfrank.com