First quarter of 2010 brings improvement on Poland’s residential market

2010-07-13

The residential markets of Central Europe have, since the beginning of the economic crisis, differed markedly. Whereas in the first quarter of 2010 some countries of the region were already demonstrating signs of recovery, others were still struggling with the recession. One of the CE residential markets in which some positive signs can be observed is Poland.

The major primary housing markets in Poland, i.e. in cities such as Warsaw, Wroclaw, Tri-City, Poznan, Krakow and Lodz, are gradually reaching a state of balance, according to a monitoring study by the REAS. The main factors which had positive impact on the state of the Polish residential market in the first few months of 2010 were: an improvement in the moods of customers as a result of positive signals pertaining to the country’s economic performance, the slow liberalisation of the mortgage policies of banks, slight reductions in the prices of flats and the fact that developers’ offers started to be adjusted to take the purchasing power of customers into account.



The first quarter of the year brought a marked improvement, in sharp contrast to the considerable slump in the number of new investment projects started by developers in Q1 2009. According to data from the Polish Central Statistical Office (GUS), in Q1 2010 developers began to build 11,542 homes, a 53.4% year-on-year increase. In total there were 27,241 residences commenced in Q1 2010 in Poland, i.e. 16.1% more than during the corresponding period of last year. This should be considered a positive sign, particularly given the very unfavourable weather conditions in the first three months of 2010. According to a report by Home Broker, listed residential developers operating in Poland, i.e. Dom Development, J.W. Construction, Gant, Polnord and Ronson Development, between them concluded sales of close to a thousand flats in Q1 2010, which is around 110% more than during the analogous period of 2009. Smaller companies, which have suspended their operations over the past two years, are also starting to implement new projects. Furthermore, new players are also appearing on the market, entities which would like to take advantage of the better conditions prevailing in the residential construction arena. These include firms such as Crystal Development, which builds homes in Warsaw, and Arch-Bud, which is in the process of commencing a residential project in Krakow.



However, the number of newly issued construction permits still remains very low: in the first three months of the year, according to the GUS, developers received construction permits for 11,786 residences, a 31.2% year-on-year reduction. In total in Q1, construction permits were issued for 35,407 dwellings in the country. Most developers are showing a preference for completing projects planned or started before the crisis, which were suspended as a result of the downturn, rather than rapidly preparing new undertakings. The companies are waiting for more obvious signs of take-up in the sales of homes offered. The first few months of the year have, however, instead brought only stabilisation in terms of prices and demand. Despite the fact that developers are trying harder to adjust their offer to customers’ needs, for example increasingly implementing projects in less prestigious locations where prices and, consequently, margins, are lower, the residential market in Poland still remains a buyer’s market. In Q1 2010, banks advanced 48,300 mortgage loans worth almost PLN 10bn (€2.5bn), according to a report released by the Association of Polish Banks (ZBP). The first quarter of 2010 yielded a significant improvement on the mortgage banking market, and this could be a promising sign in terms of the greater accessibility of such loans in future months.

Katarzyna Grabarz
Business Editor
PMR Publications