There are many predictions emerging in the real estate market.
I base my opinions on statistical data and my 14 years of experience in the secondary real estate market. I’ve already seen massive falls in the market prices, so I am immune to such phenomena. When analysing even the most accurate statistical data, it is always necessary to take into account the entirely new trends of a rapidly changing world, sudden population migrations and consequently, capital transfer or noticeably significant changes in consumer attitudes.
I see no economic basis for further substantial price increases in Poland. Developers in the primary market driven by material and labour prices and a drop in the profitability of bank deposits in 2019, have increased prices and sold off some of the flats under construction. Regardless of the shortage of land for new investments, the price level and the limited choice of offers caused some clients to move to the secondary market (see NBP data from Q2). Of course, prices have increased here too, but this trend can, in my opinion, only be stopped in 2020, with no expectations of any great further rises.
Bundling sales of flats in the primary market for investment funds rather demonstrates the expansion of the basket with bundles outside the office and retail zone. The great comeback of office buildings to the centre of Warsaw for the convenience of generation Y, better communication and prestige. Over time, office buildings by Galeria Mokotów will be converted into loft flats. The number of new office investments in the centre of Warsaw will slowly begin to reduce the outskirts rates in this segment. And the e-commerce/IT market is clearly replacing shopping centres in the long term in the way that it is currently being offered to the clients. There has already been a significant rotation of rentals in commercial properties. Even those of a higher class. With this comes a growing trend of reducing the amount of space rented for individual shops and service units. Investments in housing complexes in the vicinity of universities or modern office buildings should therefore come as no surprise. Nevertheless, in the current scope, they do not, in my opinion, account for the trend of price increases in 2020, both in sales of new flats and rates achieved from rentals.
I believe that if clients do not have their own business, factories, an idea for a profitable start up, etc., it is safer for them to invest in real estate in the long term, without losing money, instead of keeping their savings in deposits. I am not a fan of standing in line for a flat to rent, as was recently shown in Berlin 😉 Although it is good to own one property entirely. In this respect, I am a traditionalist – it is difficult to rent a flat for yourself for several decades out of your pension in Poland, it is better to buy at least one property and use other mechanisms, such as the reverse mortgage, in your old age.
Don’t try to make it rain – simply make pragmatic investments with a higher share of your own funds. And if you plan to exchange your flat or house for a larger or smaller property, you should now do so simultaneously with the sale of your property, if this is possible financially and for safety reasons.
Below is an extract from the data of the National Bank of Poland – “Information on housing prices and the situation on the residential and commercial real estate market in Poland in the second quarter of 2019”.
Enjoy your reading and make good investment decisions in 2020.
- The housing investment (not including transaction costs) was still profitable in the short term (profitability calculated as the difference of the interest rates). Assuming an average rent obtainable in Warsaw and 6M, the profitability of the housing investment was still high compared to the interest rate on a bank deposit, slightly lower than the profitability of 10-year treasury bonds and remained close to the capitalisation rate obtained in the commercial real estate market. The ratio of the costs of servicing a housing loan to the rent still makes it possible to finance the loan costs with rental income, but with LTV=80% such a flat hardly generates any financial surplus for the owner.
- The value of newly granted housing loans in PLN (excluding renegotiated agreements) amounted to around PLN 14.7 billion in the quarter in question, i.e. higher by 23.5% compared to the previous quarter’s figures and higher by 12.5% compared to Q2 2018. The results of the NBP survey on the situation in the credit market indicate that banks did not change the criteria for granting housing loans, but slightly changed some conditions, i.e. increased the credit margin and non-interest credit costs. Banks have observed an increase in demand for housing loans. In Q3 2019, banks anticipate a stricter lending policy in the housing loan segment and a slight increase in demand.
- Annual sales of flats and contracts for their construction in the 6 largest primary markets in Poland remained at the level of the previous quarter and amounted to approximately 62.4 thousand. The stock of unsold flats (and contracts for their construction) in these markets increased by approximately 0.1 thousand compared to the previous quarter and amounted to approximately 51.3 thousand at the end of Q2 2019. The number of flats ready for move-in in the sales offer decreased.
- The time-to-sale index for flats on the primary market in the 6 largest markets remained at 3.3 quarters. This still means quick sales of emerging offers and limited housing choices for buyers. The time of sale of flats on the secondary market, as estimated by the NBP, has decreased in all analysed cities, which indicates that part of the demand has shifted to this, currently cheaper, market.”