NBP just published the latest data on transaction prices for the first quarter of 2021. It shows that new apartments are getting more expensive almost everywhere. Interestingly, the average price per square meter has fallen in the seven largest cities in Poland.
Expander notes that in as many as 13 of the 17 cities analyzed, prices have reached their highest levels in history. You can talk about the real madness in Gdynia, where the average price has gone up by as much as 16 percent. In only a quarter. In the secondary market, the situation is less clear. However, if we only look at the seven major cities, the average price is down 1.3%. This is largely due to Warsaw, where, after four years of continuous increases, rates suddenly dropped 4 percent.
In the context of housing prices, Eurostat’s latest demographic forecast is also interesting. According to her, the population of Polish cities will decrease by up to 10% by 2050.
The developers, although they build a lot, have no problem selling apartments. They also managed to raise prices again. Averages, for each of the seven largest cities (9,153 zlotys per square metre) and for the next nine largest cities (6,680 PLN per square metre), are at the highest levels in history. Record rates appeared in as many as 13 of the 17 cities surveyed by the NBP. The average price per square meter for a new apartment has increased by 3%. Compared to the last quarter of last year, it increased by 7 percent. Regarding rates a year ago. However, dips are rare. They were only observed in ód q (-2% q/q), Lublin (-1% q/q) and Zielona Góra (-1% q/q).
Among the many increases, Gdynia deserves special attention, as there is a real craze on the market. The average price per square meter was as much as 9,440 PLN. That’s as much as 16 percent. more than the previous quarter. In such a short period, the price of an apartment of 50 square meters has increased by as much as 65 thousand. PLN. After this increase, this fixed amount costs 471992 PLN. Therefore, it is more expensive in Gdynia than in Krakow or Wroclaw. Higher prices are only valid in Gdansk and Warsaw.
Home prices in the primary market in the first quarter of 2021
In the secondary market, the situation is more complicated. On the one hand, we have noticeable increases. Compared to the fourth quarter of 2020, prices in Lublin increased by 4 percent, in Krakow by 3 percent, and in Szczecin by 2 percent. However, there were decreases of a similar scale – in Warsaw (-4%), Poznan (-2%) and Lodz (-2%). It is worth paying special attention to Warsaw, which is by far the largest real estate market in Poland. The pullback first appeared there 4 years ago, and we last saw such a strong correction 8 years ago.
However, we should add that such low prices in Warsaw can only be an illusion. This is suggested by the so-called fun indicator which shows price changes, but assuming we are comparing similar places. The value of this indicator increased by 1.2%. compared to the previous quarter. This means that although the average price per square meter has decreased in Warsaw, the average price for a particular type of apartment has increased. We do not know the exact reason for this situation, but it may be, for example, the fact that in the first quarter of 2021, more apartments of large size, older or located in cheaper areas, that is, those with a lower price per square meter, were sold.
Housing prices in the secondary market in the first quarter of 2021
Prices are not likely to fall in the near future. The demand for mortgage loans is huge, among other things. Because it is a cheap and easily available recording. We also have very low unemployment, which means that Poles are not afraid of getting into debt. Investment in apartments is also encouraged by very low interest rates on bank deposits (average 0.2% per year) and high inflation, which according to Eurostat in Poland is up to 5.1 percent. It is the highest in 20 years. In addition, the prices of building materials and wages in construction are rising. In the long term, additional demand will also be secured by solutions provided as part of the Polish system, ie a loan without special contribution, loan subsidies and housing bills.
However, there are already factors looming on the horizon that will slow growth and may begin to decline in the future. In the near future, the demand for housing may decline due to the expectation of introducing the above subsidies on loans or housing bills. Many people will now hold back from the purchase, considering that they will gain additional benefits thanks to these solutions by purchasing in 1-2 years.
Another factor is higher interest rates. The moment approaches when the feet begin to grow. Then the interest rates on bank deposits and bonds rise. As a result, apartments that are bought with the intention of making money from rent will no longer be an attractive capital investment. Some investors may decide to sell it. Mortgage loans will also become more expensive, and at the same time, they will become less accessible. This will lead to a decrease in demand from people who buy places for themselves.
In the long run, the decline in housing prices will be affected by demographics. Eurostat just announced its forecast, which shows that the population of Polish cities will decline by up to 10% by 2050. Of course, smaller centers will be hit the hardest, but some large cities (like ód) are also depopulating. This means that some apartments will be empty. When investing in real estate, it is worth looking for those whose attractiveness will not decrease in the long run.
Jaroslav Sadowski, Principal Analyst for Expander Advisors
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