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Housing market still in search of equilibrium

Date: 21-12-2011

NBP Report: According to the latest quarterly publication of the NBP, real estate prices continue on a slight downward trend, yet the condition of the real estate development sector remains sound.

„Information on home prices and the situation in the residential and commercial real estate market in Poland in 2011 Q3” , published by the NBP on December 21, shows that the majority of trends observed in 2011 Q1 continued in the analysed period. . The authors of the study describe those trends as “the market’s shift toward a new equilibrium with lower home prices and falling production costs”.

The primary and secondary market in major cities continued to see a slight decline in nominal home prices, both offer and transaction prices. In ten major cities the average transaction price per one square meter in the primary market went down from PLN 4770 in 2010 Q3 to PLN 4751 in 2011 Q3. An even stronger drop in the average transaction price was observed in 7 major cities – from PLN 6582 to PLN 6126. In the secondary market, on the other hand, the average transaction price per one square meter in those 7 cities fell from PLN 6475 to PLN 6292. In Warsaw, being the most expensive housing market, it recently reached PLN 7920, whereas in Zielona Góra, the cheapest housing market among those 10 cities, it stood at PLN 3070. Real terms price declines in were even deeper, as throughout the whole period average wages posted a few percent increase.

The authors of the study expect housing demand to level off. Further decline in prices will be driven by the record high number of completed housing units for sale (approx. 50 thousand), a large part of which was designed already in the housing boom period, and now, considered as large and expensive, fail to find buyers at prices offered by real estate developers. In spite of this, real estate developers have now embarked on more development projects than in the previous periods which, in the opinion of the NBP’s experts, may result from their intention to build homes before the entry into force (April 2012) of the act enhancing protection of developers’ clients. The condition of real estate developers is still sound. Although the share of developers’ profits in home prices slightly dropped, it still remains high.

As regards investment in commercial real estate, its level for the first three quarters of 2011 almost reached the figure for the whole 2010. In the case of office real estate, rents were stable or slightly rising, which reflects growth in the prices of this kind of real estate. The hotel real estate market continued to post a robust growth, especially outside voivodship cities. Poland’s commercial real estate market is perceived as mature and increasingly transparent.

For details see: Information on home prices and the situation in the residential and commercial real estate market in Poland in 2011 Q3” (in Polish)

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