Housing boom set to end?
Residential“This is a record figure and perhaps symbolises the end of the housing boom, as is being increasingly confirmed by a number of factors,” comments Marcin Krasoń of Home Broker.
The housing boom continued through last year in Poland, when 184,800 residential units were handed over during this period, 111,500 of which had been built for sale or rent. The number of units completed increased by 3.6 pct across the entire market and by 6.2 pct for developers.
“This is an oddly low increase considering the number of construction launches and building permits issued to developers has been growing at double-digit levels. This is most likely related to the delays in the construction of projects. Although this is not a widespread phenomenon, due to the problems with contractors and high material prices, shutdowns and the first few delays are occurring on building sites,” comments Home Broker analyst Marcin Krasoń.
Furthermore, the growth in the number of new projects is probably an attempt to recover from weaker sales results (Q4 2018 was more than 26 pct weaker than the same period last year, and the entire year was almost 13 pct weaker). The number of construction projects started by developers has been constantly growing. In the last twelve months it was 137,646 units, 30.6 pct more than a year earlier. However, these statistics have been impacted by a change in GUS’s method of counting in 2018. Some units built by individual investors are being sold immediately. Until now they have been classified as ‘individual construction’ and from January onwards they are to be included in the ‘for sale and rent’ category, therefore these values are somehow automatically higher at the beginning of the year. According to Home Broker’s estimates, the percentage of these ‘transferred’ units in the statistics comes to no more than 10 pct, i.e. the number of started construction projects has been increasing by 15–20 pct y-o-y, but it is not possible to measure this exactly.
“The significant drop in sales in Q4 confirms that the end of the boom in the market is approaching. If you add the forecasts of the Polish Bank Association, according to which the volume of mortgages issued will fall to PLN 45–50 bln in 2019 (it was PLN 53–54 bln in 2018), then it looks like the end of the housing boom is getting closer,” predicts Marcin Krasoń.
“GUS’s statistics and house prices may even keep growing for several months, but in my opinion 2019 will be the year when this trend is reversed. However, those who are looking to buy a home should not expect there to be any spectacular price falls making it easy to identify investment opportunities. This is due to a large number of inhibiting factors. The high construction costs, the payments developers will have to make into the state guarantee fund and the low interest rates will not allow homes to depreciate in value more than about 5–8 pct a year,” adds Marcin Krasoń.
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