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Building Material Prices Continue Downtrend in January, But Future Rebound Expected

REAL ESTATEBuilding Material Prices Continue Downtrend in January, But Future Rebound Expected

This year’s January did not change the situation on the domestic building materials market in any way, making the start of the year yet another, fifth consecutive monthly period of rate correction. According to experts from RynekPierwotny.pl, this time the average level of discount rate year-to-year was 3 percent, while month-to-month practically did not change (+0.1 percent). Therefore, on the domestic building materials market, the intensity of correction is slowly increasing.

The January deepening of construction materials’ price correction to -3 percent indicates that their average dynamics are still on a decreasing trend, already several months below zero. However, there are premises indicating that the situation in the foreseeable future may undergo a rather radical change.

In the latest report by the PSB Group, a breakdown of price dynamics in the wholesale channel shows a drop of 5.4 percent, and the retail result was a decrease of -1.1 percent. The difference in costs of purchasing building materials by large investors, such as developers, compared to retail customers, therefore, seems quite significant.

PSB Group’s reading of the decreasing price dynamics of building materials in January this year again surprised with its intensity, especially for items at the top of the table, i.e. those that were still becoming more expensive. Cement-lime remains the leader of the increases, being the most strongly rising year-to-year by almost 13 percent, ahead of paints, varnishes (+7 percent), and home surroundings (+3 percent).

Again, the 7 to 13 ratio of product groups becoming more expensive and cheaper year-to-year did not change. Among the latter, like a month ago, OSB boards with wood and thermal insulation stand out, this time with a price regress year-to-year of 22 and 10 percent, respectively.

According to experts in the building materials market, frequently quoted in the media, the current price correction is expected to be only temporary, due to a seasonal drop in demand, which should systematically increase in the following months. Producers of building materials hope for the greatest improvement in their industry’s outlook in the housing segment. The prospect of another government program subsidizing mortgages and slowly improving housing loan availability should induce developers to increase the supply in the popular segment.

However, the experts at RynekPierwotny.pl note that a program of decisive activation of municipal, social rent, and even cooperative building is crystallizing in the Ministry of Development and Technology. If it is implemented in the coming months, another stimulus for the building materials market will become a fact.

However, it is not excluded that an equally significant, and perhaps primary factor, that can influence the supply-demand relations of the building materials market this year is the increasingly closer prospect of Poland obtaining funds from the KPO, most of which will be earmarked for infrastructure investments.

In this situation, the detente in prices in the domestic building materials market may soon become a thing of the past, regardless of the strength of the złoty and the decreasing price of raw materials worldwide.

Author: Jarosław Jędrzyński, expert at RynekPierwotny.pl.

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