GROUND-LEVEL Perspective on the Real Estate Market

The main factors affecting the housing market climate in 2024 were uncertainty related to the mortgage subsidy program for first-time homebuyers and persistently high interest rates. The delay in political decisions regarding the introduction of the new program caused potential buyers to postpone their purchase decisions. Additionally, even those not planning to use the program waited for resolution, hoping for potential price reductions.

Ultimately, the subsidy program was not implemented in 2024, though discussions continued. A revised version emerged, excluding purchases in the primary market. By mid-2025, five more months have passed with subsidies still only at the discussion stage.

The past year brought a slowdown in new apartment sales, resulting in greater price flexibility and negotiation from developers, with average housing prices stabilizing across most markets. The continued expensive financing for buyers did not improve the situation in Q1 2025.

However, May 2025 brought a significant positive change for market participants. The Monetary Policy Council decided on the first interest rate reduction in a long time - by 50 basis points. This should increase interest from homebuyers, particularly in the second half of 2025 and into 2026. Meanwhile, investment demand for rental apartments from private individuals will remain somewhat limited in the medium term.

This is partly due to high purchase prices and deteriorating returns compared to alternative investments. However, this may create more space for new PRS (Private Rented Sector) projects by institutional investors.

The current market conditions, combined with low land supply and the expiration of the "Lex-developer" housing special act, contribute to maintaining high prices for investment land, with further increases in the best and most prestigious locations.

Since the pandemic, the office real estate market has faced numerous challenges, resulting in severely limited construction activity and demand for office development land. During prosperity periods like 2018, modern office space under construction in Poland reached 1.8 million sq m. Today, it fluctuates around 440,000 sq m, with the number of office buildings under active construction decreasing from 125 to 35.

These figures clearly demonstrate how uncertainty about the future of offices, remote and hybrid work, high financing costs, construction, and office finishing costs have influenced developers' decisions regarding land acquisition for office investments and project commencement.

The last five years represent a period of unprecedented evolution in Poland's retail real estate sector. New supply has been dominated by retail parks and convenience centers, which together accounted for 70% of total new space delivered between 2020-2024. This means an average of about 260,000 sq m (GLA) was delivered annually in retail parks, compared to 93,000 sq m (GLA) for traditional shopping malls.

Moreover, the annual volume of new supply in retail parks and convenience centers now approaches the level of shopping centers from 2008-2009, when shopping malls delivered 490,000 sq m and 499,500 sq m (GLA) annually, respectively.