May marks the third consecutive month of declining home sales in the developer market. Sales have dropped by 10% compared to the previous month and by 20% compared to the same period last year, reflecting a significant decline not seen in a long time. Meanwhile, the housing inventory in the seven main markets has been rebuilding, with developers having nearly 47.5 thousand homes for sale at the end of May 2024, yet only selling just under 3.2 thousand. Despite this, prices continue to rise.
May 2024 was another month where the number of homes added to the market exceeded the number sold, resulting in a further increase in available inventory. At the end of the month, developers in the seven largest cities had nearly 47.5 thousand homes for sale, the highest number since the fall of 2022, marking an annual increase of over 20%. In contrast, just under 3.2 thousand housing units were sold. Notably, the last time sales dropped below 3.5 thousand was at the turn of 2022 and 2023.
Krakow Still Sluggish, Łódź Faces Oversupply Concerns
Monthly data from Otodom Analytics shows clear declines in the largest metropolitan areas in Poland. During the first few months of the year, only Katowice and Poznań saw growth.
Preliminary monitoring analysis indicates that May sales in Warsaw totaled 1,057 units, down 6% month-over-month and 22% year-over-year, with the final figure potentially dropping below 1,000. Inventory in Warsaw has been increasing since autumn, growing by over 3.5 thousand new homes from just over 8 thousand at the end of September 2023, matching the entire supply of Katowice. Despite the lower demand impacting the broader housing market, Warsaw still recorded the highest sales among the seven main cities. However, the most interesting developments often occur outside the capital, comments Marcin Krasoń, a housing market expert at Otodom Analytics.
This time, the second-best sales were recorded in the Tricity area – 511 units, with 431 in Gdańsk alone. Following are Wrocław (450), Krakow (378), and Poznań (365). Developers in Krakow continue to struggle despite a significant recovery in inventory, which has increased by 53% since the end of September last year. The number of new homes available for sale in Krakow is still lower than in Wrocław, Tricity, Poznań, and Łódź. Hence, the low sales figure of 378 units in May, the lowest since the weak August 2022. Similar figures were last seen in spring 2022, when the COVID-19 pandemic was gaining momentum worldwide.
In other cities, the situation was more stable. I am continuously monitoring the situation in Łódź, where for the tenth consecutive month, the number of new homes for sale exceeded the number sold. Consequently, the inventory in this market has grown from 5 thousand to 8.5 thousand units, now the second highest in Poland. The mismatch between inventory growth and sales volume suggests a risk of oversupply in the long term, explains Marcin Krasoń.
A crucial parameter for assessing the developer market is the time required to clear inventory. This is calculated for each city based on the last three months’ sales and current inventory levels. Otodom Analytics data shows that Warsaw has faced the most challenging situation for months. For instance, if no new homes were added to the market and sales continued at the average rate of the last three months, the last unit would be sold within 10 months. In contrast, in Łódź, the inventory would last over two years.
However, a closer look at individual cities is necessary. Krakow’s low sales are clearly due to limited inventory. Numerically, Krakow appears safe with an inventory clearance time of four quarters, but remember that in good months, sales in Krakow exceeded a thousand units, which would be impossible with today’s inventory.
Warsaw Sees Fewer Reservations
Otodom Analytics data reveals that in May, there were 1,861 new reservations across the seven main markets, the lowest in nearly 1.5 years. Following a brief surge in mid-April, likely due to the announcement of the #nastart credit regulation bill, and clear signs of stabilization in the second half of the month, the end-of-May reservation numbers confirmed fears of a cooling demand.
The 1,861 new reservations represent a 22% decrease from April and a 27% drop from May 2023. However, it’s important to note that last year’s reservations were significantly influenced by the BK2% rule implemented in July. The last time fewer than 2 thousand units were reserved monthly was in the second half of 2022.
The low number of reservations in May cannot be attributed to fewer selling days. When adjusting the reservation volume for days, the result indicates that potential buyers are holding off not only on purchases but also on reservations. Notably, May’s significantly lower reservation volume on major markets was primarily due to Warsaw, where reservations were down by 42% from April. This reduction significantly impacted the aggregated result for the seven markets, explains Katarzyna Kuniewicz, Head of Market Research at Otodom Analytics.
Housing Prices Continue to Rise
May saw an increase in square meter prices in all seven surveyed cities, both month-over-month and year-over-year. In the shorter term, prices rose by about 1%, while the annual increase ranged from 10% in Katowice to over 20% in Krakow, Łódź, and Warsaw.
The annual price growth exceeding 20% in the three largest cities contradicts the expectations of some observers predicting imminent price drops. However, the rise in offer prices is not due to cheaper homes leaving the market and being replaced only by more expensive ones, which would artificially inflate offer prices. For example, in Tricity, new offers have been cheaper than existing ones for several months, but the cheapest homes are still disappearing. Are we likely to see the predicted price declines per square meter? Probably not. Prices are rising, albeit more slowly, but there are no signs of significant market promotions, concludes Marcin Krasoń.
