Significant increase in sales on the Polish residential market in Q2 2023

Although there were only a few transactions related to the "two per cent loan" plan, the growing number of reservations confirmed that interest in the program is very high. According to data from real estate consulting company JLL, a total of more than 15 500 apartments were sold by developers in Q2 2023 in Poland’s six major markets, Warsaw, Krakow, Wroclaw, the Tri-City, Poznan and Lodz. This was a 36% improvement on the previous quarter.

·       Demand is back in Poland's primary housing market but supply in the shape of the number of new developments entering the market is currently not keeping pace. In H1 2023, developers sold almost 27 000 new apartments, while only 17 000 were supplied to the market. The difference of almost 10 000 units means that supply gap levels are similar to 2021. The demand-supply imbalance may therefore cause another sharp increase in housing prices in the next few months.

·       The difference between the average prices of flats sold, and the average prices of flats that remained on offer at the end of the quarter began to grow. In Warsaw and Krakow, it was about 1600 PLN/sq m, in Wrocław over 1500 PLN/sq m, in Poznań PLN 800/sq m, slightly less in Łódź, and "only" PLN 500/sq m in Tri-City.

·       In the second quarter of this year, with the exception of Łódź, the largest Polish cities clearly exceeded new supply. As a consequence, the offer decreased in these five markets with the largest reductions observed in Kraków and Warsaw.

Increase in sales despite economic problems

In Q2 2023, sales of new apartments returned to levels last seen in 2021. Despite the fact that the Polish market is facing many problems - a decline in GDP, the highest interest rates in twenty years, the lowest birth rate since World War II, inflation and war in a neighbouring country, the residential market is experiencing a revival. Everything indicates that we are dealing, to a large extent, with a "flight forward", i.e. a race against an expected increase in prices, anticipation of a supply gap, as well as hopes for more loans with subsidies.

“Fears of a possible increase in prices and a reduction in the offer had the strongest impact on the primary residential market. Buyers looking for apartments both for their own needs and for investment purposes have therefore accelerated their purchasing decisions. The decisions of people intending to take advantage of a loan without a subsidy could have been positively influenced by information about falling inflation and the introduction of the "WIRON" ratio as the basis for interest rates for loans with a variable rate.” – summarised Aleksandra Gawrońska, Director, Head of Residential Research, JLL.

Imbalance between supply and demand

After three quarters of stagnation, new supply has finally picked up. The supply on the market has increased by over 10 000 new apartments, an almost 50 per cent increase on the previous quarter. This rise in supply was seen across the board with the largest QoQ increase in Tri-City (127%), with the smallest in Poznań (6%).However, except for Łódź, sales clearly exceeded new supply in all cities, with the offer decreasing in five of the six major markets. The largest decrease was observed in Kraków and Warsaw. In the capital, at the end of June, customers had only about 10 400 apartments to choose from, while in Krakow it was less than 5 500. In total, Poland’s six main markets saw supply fall to about 40 600 apartments at the end of June.

“The high level of sales and insufficient supply mean that the markets are entering a phase of a clear excess in demand. If the current pace of sales in Warsaw and Kraków were maintained, all flats currently available in these cities would be sold within six months. If developers do not increase new supply quickly, they will have to put a temporary cap on sales. The imbalance between supply and demand is likely to result in a rapid increase in prices.” – said Aleksandra Gawrońska.

Record prices

At the end of June 2023, the average prices of apartments on offer reached record levels in each of the major markets. Tri-City and Wrocław exceeded PLN 13,000/sq m. Kraków almost caught up with Warsaw with an average price at the end of June with as much as PLN 14,700/sq m. Prices in Poznań and Łódź also skyrocketed to PLN 11,500/sqm and PLN 9,6000/sqm, respectively. The average quarterly price increase in most cities ranged from four to five per cent.

“When the offer shrinks and flats sell quickly, the price level is influenced mainly by the following phenomena: the sale of cheaper flats, higher prices of flats introduced to the market and price increases of flats which were on offer at the beginning of the quarter. This is confirmed by the data: the spread between the average prices of flats sold and the average prices of flats that remained on offer at the end of the quarter had begun to grow. This phenomenon may also be influenced by an increase in the offer of more expensive properties, aimed at wealthier prospective buyers who want to move further upmarket. The collapse of credit-supported sales, especially in the second half of 2022, shifted developers' attention to this product. However, their sales are usually slower. Today, some of these units are still on offer, especially in markets such as Wrocław and Poznań.” – said Kazimierz Kirejczyk, Senior Strategy Advisor, Housing Sector, JLL.

Impact of the government program

Developers, mainly those operating in the basic standard housing sector, focused on buyers willing to take advantage of the "safe two percent loan" offer. Most companies offer a pool of apartments prepared for this purpose, which fall within the price limit. As of today, the rules of operation of the new housing program mean that the choice of premises under subsidized housing loans is relatively large, especially if we look back at previous programs and price limits per square meter.

Although in the last quarter, the majority of buyers were still cash purchasers, both the number and the share of buyers using loans increased significantly. Developers have said that there were few transactions related to the "two per cent loan" plan, but the growing number of bookings would suggest that interest in the program is very high.