The latest statistics from Poland’s Central Statistical Office (GUS) regarding residential construction incite mixed feelings. On the one hand, they indicate a significant increase in investment activities compared to last year. Experts from RynekPierwotny.pl, a real estate portal, however, point out that the investment momentum is fading due to low credit availability and decreasing demand for apartments.
This year will certainly not set a record in terms of the number of apartments put into use. GUS data shows that slightly over 128.8 thousand apartments were ready for use after eight months, which is about 11% less than in the same period last year. These statistics do not necessarily reflect the current state of the housing market. Still, it will most likely worry producers of finishing products, furniture, and household appliances. Fewer households translates into a drop in demand for these products. Fortunately, there is a chance that in the coming years, there will be more keen customers, as evidenced by GUS statistics regarding apartments included in building permits and those under construction. The former was 30% higher than last year in eight months, while the latter was over 35% higher.
This year’s revival in single-family construction is particularly encouraging. In this period, individual investors obtained permits to build nearly 53.5 thousand apartments (mainly single-family homes), which means an increase of about 12% compared with the same period last year. However, it’s debatable whether this momentum will continue in the coming months. August’s data (over 6.7 thousand apartments and houses covered by building permits), which are about 14% worse than those of July, could raise mild concern.
Like in the developer’s construction segment, increased permissions obtained by developers are not the cause for concern. There were around 138.2 thousand apartments covered by permits in eight months, which is over 40% more than a year ago. However, housing construction data is somewhat worrying. Developers began the construction of approximately 12.8 thousand apartments in August, almost 9% more than in July. The eight-month balance also looks very good, with almost 105.2 thousand apartments started by developers, approximately 55% more than in the same period last year.
However, remember that this impressive result is largely due to a low base. As experts from RynekPierwotny.pl point out, for much of last year, the uncertain economic situation and the fear of a recession that could lead to an increase in unemployment did not favour the commencement of construction. Developers only picked up pace once it was clear that such a dire scenario was unlikely for Poland. Moreover, they started this year with great gusto, with the first-quarter registering the highest number of new constructions in housing market history. Unfortunately, developer’s investment activity has declined in subsequent months. The second quarter was markedly worse than the first, and it appears that the third will bring a further decrease in the number of apartments started.
It’s not surprising, given the doubts whether the new support program for borrowers, “Mortgage #toStart,” will come into force. Banks have been granting fewer and fewer loans on market terms each month. According to data from the Credit Information Bureau (BIK), banks granted 14.8 thousand housing loans in August, 12% less than in July and 41% less than in January this year. Moreover, the number of credit applications dropped significantly in August.
Remember also that the start of housing construction does not mean that they automatically go on sale. Many indications suggest that due to falling demand, developers will adopt a wait-and-see position. According to BIG DATA RynekPierwotny.pl, the third quarter of this year will see a lower new supply in almost all metropolises (Krakow being possibly the exception) than the months preceding the holidays.
Meanwhile, the Polish government is debating whether to support apartment buyers or home builders. Pressure is mounting from those who believe that all state budget resources available for housing support should be directed at municipalities and social housing societies (TBS). GUS data indicates that over 126 thousand households are waiting for municipal apartments, as they cannot afford to buy an apartment with a loan or rent in a market. Over the last five years, municipalities have built just under 6 thousand apartments, an average of about 1.2 thousand per year. This year will see a slight improvement. After eight months, municipalities completed the building of nearly 1.3 thousand units (about 57% more than last year), and TBS – almost 1.9 thousand, almost twice as much.
Unfortunately, the statistics concerning started apartments are upsetting. This year, municipalities have only started building 432 apartments (a drop of about 41%), while TBS – just over 1.8 thousand (a decrease of about 3%). This shows that the approach of municipalities must change fundamentally. From 2021, they can expect financing of up to 80% of the project cost.
Author: Marek Wielgo, a specialist from RynekPierwotny.pl.
Source: https://ceo.com.pl/koniec-boomu-na-rynku-mieszkaniowym-77301
