Prices of building materials are falling. How does this relate to real estate prices?

In December 2023, prices of construction materials dropped on average by 2.6%. y/y and by 0.2 percent mdm – Polskie Składy Budowlane (PSB) announced on Thursday. “December’s continuation of the price correction for construction materials by -2.6 percent. should be classified as significant. Since September, the average price drop has already amounted to a total of 5%, and interestingly, there is little indication that the situation will change radically in the foreseeable future,” the release states.

Building materials are getting cheaper

The prices of cement and lime increased the most by 16.6%, and paints and varnishes by 7.1%. and construction chemicals by 3.1%. The greatest declines in price included OSB boards and wood (by 24.7% y/y), thermal insulation (by 8.5%) and walls and chimneys (by 6.2%).

The report states that eight product groups experienced positive sales dynamics, while negative sales dynamics occurred in twelve cases, which is exactly the opposite of the month before. “This time it may suggest that the decline in prices of construction materials is, at least to a significant extent, due to insufficient demand for them,” it added.

Is there a chance for real estate prices to drop?

Is there a chance that lower prices of materials will be a sufficient reason for developers to lower prices at least a little? This may not be enough: the market has been heated since July, mainly due to cheap loans. The government launched the “Safe 2% Credit” program. in a situation where there was an insufficient number of apartments on the market because developers had been limiting new investments for the last two years. So when sellers realized that tens of thousands of new buyers would soon come to them, they raised prices – they knew that sooner or later there would be people willing to buy. Additionally, customers who benefited from the government subsidy were more willing to accept increases.

The program has already ended and the next subsidy program will start in mid-2024. Until then, many more new apartments will not hit the market, because developers returned to construction sites only at the beginning of 2023, and the construction process takes at least a year and a half. Hence, it should be assumed that the “throwing” of another tranche of cheap loans will result in further draining of the market.

Starter apartment – ​​assumptions

Let us recall the most important assumptions of the “Mieszkanie na start” program.

As in the case of the “Safe 2% loan” program, the support will be available for the purchase of the first apartment. An exception will apply to 5-person families.

The interest rate will be:

• 1.5 percent for 1- and 2-person households

• 1 percent for 3 people

• 0.5 percent for 4 people

• 0 percent for 5 people

Interest subsidies will be available for 10 years, but will amount to no more than:

• 200 thousand PLN for a single-person household

• 400 thousand PLN for a 2-person room

• 450 thousand PLN for a 3-person room

• 50 thousand each for each additional person.

The Minister of Development and Technology announced that the government’s new housing program will be launched in mid-year. Hetman also announced that PLN 500 million has been reserved for the program in the 2024 budget.