Polish primary housing market in a moderate scenario

Easing of economic restrictions resulted in a clear increase in sales of new units in June. Maintaining price levels and the interest of buyers is a good omen for the real estate industry for H2.

August 10, 2020

Developers in the six largest Polish cities sold a total of 6,900 units in Q2 2020, which is 64% less than in the previous quarter. The drop in the number of units whose construction has already begun was definitely smaller. The offer increased by 10,500 new units, which is 19% less than in the previous quarter, although more than 30% less than the average for the quarter in the last three years. Taking into account the fact that the first, most restrictive phase of the COVID-19 pandemic took place in Poland at this time, the results at the end of the quarter can be considered moderately optimistic, according to the latest JLL report: Residential Market in Poland Q2 2020.

“The first half of the quarter was most difficult when the restrictions in movement and first wave of returns, i.e. resignations from reservation agreements, led to negative sales numbers in some districts of major cities. After the easing of the restrictions, buyers returned to closing transactions, while the flexibility of developers offering special payment schedules or security measures in the event the buyer's financial situation worsens, helped many new buyers make purchasing decisions. Although today, or even in the next two quarters, it is difficult to talk about returning to the pre-Covid sales pace, the results achieved on the 6 largest markets are closer to the more optimistic scenarios we had predicted for the industry”, comments Katarzyna Kuniewicz, Head of Residential Research at JLL. 

Fewer buyers for flats in early stage of construction

In Q2 2020 developers managed to start sale of many new projects. It was unexpected, as the results from the beginning of 2020 indicated serious problems in this regard. The number of new introductions in all the cities analysed by JLL exceeded the number of transactions, which meant that the total offer for Warsaw, Kraków, Wrocław, Tri-City, Poznań and Łódź increased by 10.5% compared to the data for March and amounted to 48,900 at the end of June. At the same time, experts stress that this number is still lower than the average in recent years. Yet it is still considered a "healthy" offer. In the pool of units available for purchase only 11% are completed units. On the other hand, the share of units with the completion date in 2022 increased significantly, from 13% to 23%.

“This illustrates well the moods of buyers who, although they continue to make purchases are being much more cautious and more likely to choose units that will be completed within 12 months from the date of purchase. For developers, this may mean they will need more time than in recent years to sell newly introduced projects and the need to provide additional financing at the implementation stage”, adds Katarzyna Kuniewicz, an expert at JLL.

Very low volumes - of both transactions and new introductions - make the averages subject to large fluctuations and do not reflect the real picture of the market.

Katarzyna Kuniewicz, Head Residential Research, JLL
Kaleidoscope of events and prices

Although a drop in housing prices was cited as one of the inevitable effects of the pandemic, buyers still don’t have much to celebrate. The drops in the average prices of units on offer noted in only three of the six analysed cities amounted to no more than 1%, while Kraków became the third market, after Warsaw and the Tri-City, where the average exceeded the symbolic threshold of PLN 10,000/sq m. According to analysts from JLL, the real pricing strategies of developers will be most visible in the prices of units launched for sale in the coming months, but it is still difficult to draw any far-reaching conclusions based on them.

“Until sales and launches stabilise at a certain level for two-three quarters, it will be difficult to clearly assess price trends. Very low volumes - of both transactions and new introductions - make the averages subject to large fluctuations and do not reflect the real picture of the market. In addition, consumer moods in June and July are extremely optimistic, and in autumn and winter they may slightly cool down. A major disproportion between the scale of demand and supply or news of major negative changes on the market environment, which at the moment we are not experiencing, may lead developers to make even more radical changes in their pricing policies”, explains Katarzyna Kuniewicz, Head Residential Research at JLL.