The January report by the Central Statistical Office of Poland (GUS) traditionally presents the results of housing construction, focusing on complete investment data from the primary segment of the domestic housing market in the last month and throughout 2023. Sales-wise, this period was characterized by an artificial boost of the economy through the “Safe Loan 2%” program, unfortunately coinciding with a continued regression of housing construction investment statistics.
Ongoing Slowdown in Started Investments
From the perspective of current economic sentiment, the most crucial category in GUS’s housing construction statistics are data regarding flats and houses whose construction has begun. As experts from RynekPierwotny.pl note, overall, the construction of 189 thousand flats and single-family houses started in 2023, representing just over a 5% regression in relation to the previous year. Developers alone started the construction of nearly 115 thousand premises last year, virtually the same number as the previous year.
However, one must emphasize the fact of a very low basis in 2022, when a collapse of the annual new construction statistics occurred due to a roughly 40 percent year-on-year shock of new premises’ contracts after a series of interest rate hikes.
Meanwhile, last year’s implementation of the “Safe Loan 2%” preferential loan program greatly increased the demand for new flats, shooting up a record 40 percent year-on-year. Naturally, it would seem conceivable that there would be a significant acceleration in restocking and starting new constructions by developers. Unfortunately, nothing like this happened, and so the availability of new flats was drained, and prices soared by an average of one fifth in the country’s largest conurbations.
Even worse is the situation for individual investors, who started construction on just 70 thousand houses last year, nearly 15 percent less than the previous year.
Another Collapse in Construction Permits
The situation looks significantly more pessimistic regarding the number of new construction permits or reported architectural designs obtained last year. In this case, a total of 241 thousand relevant administrative decisions were issued, representing a downfall of nearly one fifth compared to 2022. A very similar regression year-on-year occurred both among developers and those building for their needs, with outcomes of 162 thousand and 72 thousand units respectively.
As experts from RynekPierwotny.pl indicate, statistics on new construction permits are the basic parameters for assessing the demand potential of the market by developers in future periods. It is clear that the optimism of the development industry regarding the prospects for the development of the primary market in the longer term remains relatively defensive, regardless of the initiatives of successive governments deciding to stimulate demand for flats through billion-dollar subsidies for housing loans.
Flats by the Declining Wave
In 2023, GUS recorded just over 220 thousand premises completed and handed over for use, over seven percent less than the year before, marking the first decrease since 2014, during the biggest and longest-lasting boom in the national housing market. Thus, handed over flats have joined the declining trend of the other two categories of GUS’s housing construction data.
These figures are the result of economic conditions from roughly two years ago and do not reflect its current state. Hence, it was almost predetermined that a slowdown would eventually replace the increasingly weakening growth trend – a fact confirmed last year, thereby underlining the slow-down of the primary domestic housing market’s investment sentiment.
Projections for the Current Year under Question Mark
After 2022, which turned out to be a period of a sudden transformation of the sales sentiment for developer flats, pulling the main market investment statistics with flats being the front-runner; last year marked a continuation and deepening of the GUS housing construction data downfall. This leads us to continue the search for a bottom limit for the declining dynamics. The question remains, however, at what level this bottom limit may be.
Experts at RynekPierwotny.pl point out that GUS statistics for new housing investments and building permits as a whole have receded over two years to the levels of 2016. Unfortunately, this leads to a shrinking and underperforming developer offer on the primary market, despite a simultaneous stimulation of housing demand by successive government mortgage subsidy programs. Meanwhile, the prospect of increasing developers’ production capacity this year remains largely uncertain, and the continuous risk of further steps in the imbalance of supply and demand complicates the market situation and threatens to keep new housing prices rising into the double digits on an annual basis.
