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Investing in Real Estate in 2024: Challenges and Opportunities

REAL ESTATEInvesting in Real Estate in 2024: Challenges and Opportunities

– Developing real estate is definitely a worthwhile investment, despite its prices increasing significantly in recent years. This asset segment still offers respectable returns with relatively low risk available – believes Kuba Karliński, founder of the company investing in the building industry, Magmillon, and author of the book “Let’s Earn on Real Estate”. In his opinion, the implementation of a new housing program proposed by the government (including a zero-interest loan) will result in rising prices for all properties. – We will witness what we observed thanks to the so-called “Safe Loan 2 pct.” in 2023 – he adds. Therefore, as Kuba Karliński admits, to effectively make money on real estate today, one must acknowledge the challenges and put more effort into finding an effective investment strategy.

The building real estate market in Poland has been under the close scrutiny of investors for several years, both those who offer properties to buyers, and their potential owners or tenants. This year began with high prices for such properties, which on the one hand may pose another obstacle for buyers, but on the other – a challenge for those who operate in this market, and those who intend to invest their financial resources in it.

– It’s definitely worth investing in real estate this year – said Kuba Karliński, founder of Magmillon, a company investing in the construction sector. Although property prices have risen considerably in recent years, this asset segment still offers very decent returns at relatively low risk. To effectively make money on real estate, one must acknowledge the challenges and put more effort into finding an effective investment strategy, adds Kuba Karliński.

Major challenges: rising prices, limited supply, and Zero Interest Loan

According to Karliński, the main challenges for investors in the real estate market today are high prices and a limited supply. In the second half of 2023, as a result of the introduction of the ‘Safe Loan 2 pct.’ program and the relaxation of recommendations on creditworthiness calculation by the Financial Supervision Commission, demand surged and the limited supply disappeared from the market. All properties, both small and cheap, as well as large and expensive, became more expensive by an average of several percent (and in some agglomerations – even more than 20 percent). A completely new challenge is now the new housing program proposed by the government, which also includes granting a zero-interest loan. The implementation of this program will result in a higher increase in prices for all properties. We will witness what we observed thanks to the so-called “Safe Loan 2 pct.” in 2023. Property prices in Warsaw rose by over 20 percent during this time. It was similar in other cities – recalls the founder of Magmillon.

In his opinion, directing a large additional stream of money to the market without increasing supply will therefore result in a dramatic price increase. In the short term, it might look nice because everyone likes to see increased revenue figures. However, in the medium and long term, it will only further deregulate the real estate market – predicts the author of “Let’s Earn on Real Estate”. He hopes that the government will learn from the results of the October 2023 elections and the social perception of the actions of the previous governing team, which received a red card from society, among other things due to its – as he assesses – inept approach to housing issues.

Micro-locations as an answer to the investment needs of those with limited means as well as small entrepreneurs

Referring to the investment just being carried out by his company in Reguły near Warsaw, he points out that the micro-investment locations at Aleje Jerozolimskie in Platanowa Park do not have a residential character. Therefore, none of the programs supporting the purchase of apartments such as “Apartment for Start” or the so-called “Safe Loan 2 pct” apply to them. Our clients are primarily investors and entrepreneurs – people who have money and are looking for effective ways to protect it from the negative effects of inflation – he explains.

Prices will continue to rise. But at what pace?

He predicts that property prices will continue to rise. He advises waiting for the final shape of the “Apartment for Start” program. Due to the lower inflation, he hopes that the increase in prices will halt or at least slow down.

The superiority of smaller properties over large ones

Small or micro-locations in less obvious areas than before – due to price, popularity, or development prospects are profitable says Karliński. They offer greater profits from rental over a shorter period and enjoy an increase in the value of properties over a longer, several-year period.

Tenants and investors in a difficult situation

In his opinion, the current situation for tenants is also difficult, as the offer of properties for rent is lacking, and rents continue to rise, albeit slower than prices. On the other hand, investors are not too happy, since the average return rate from rental systematically decreases in large cities. He advises being mindful of such developing regions that are still relatively cheap. They might soon turn out to be a new, attractive area for investing in building properties. Carefully considered investment decisions will allow investors to earn at any time, regardless of inflation or the economic situation.

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