What’s happening in the real estate market? Unusual movements

In 10 of the 17 cities surveyed by Expander and Rentier.io, prices fell, most notably in Toruń (-7.5%). Other cities where prices fell were Gdańsk (-3.1%), Rzeszów (-3.1%), Łódź (-2%), Białystok (-2%), Sosnowiec (-1.3%), Szczecin (-1.2%), Gdynia (-1%), Poznań (-0.8%) and Warsaw (-0.1%).

Real Estate Prices: Where Are the Declines, Where is the Stabilization?

The largest price drops were recorded in the segment of small apartments in Sosnowiec (-9% q/q) and Wrocław (-6% q/q). In turn, the largest price increases occurred in the case of small apartments in Toruń (+14% q/q) and medium-sized apartments in Radom (+13% q/q).

In July, the number of apartments introduced for sale on the primary and secondary market increased significantly. The largest number of offers was in Warsaw (17.4 thousand), Wrocław (9.4 thousand) and Kraków (9.4 thousand).

According to GetHome.pl data, the first symptoms of stabilization of the average price per square meter appeared in May. However, it is only based on data from July that we can state that stabilization has already come to all metropolises. The average price per square meter has not changed for the third month in a row in Krakow (PLN 17.7 thousand/sq m) and the Tri-City (PLN 15.3 thousand/sq m) and for two months in Łódź (PLN 8.7 thousand/sq m). It also slowed down in Wrocław (PLN 14.1 thousand/sq m) and Poznań (PLN 11.7 thousand/sq m). A drop in apartment prices per square meter, by as much as 2 percent, occurred in Warsaw (PLN 18.3 thousand/sq m) and in the Upper Silesian-Zagłębie Metropolis (PLN 8.4 thousand/sq m).

Few mortgage applications

According to data from Otodom Analytics, in July 2024, fewer than 3,000 apartments were sold on the seven largest primary markets – the least since January 2023. Compared to June, sales fell by around 3%. The comparison with June 2023, when demand was boosted overnight by the “Safe Credit 2%” subsidy program, is impressive: here, the drop was as much as 40%.

This is evident in the sale of loans. According to data from the Credit Information Bureau, 14.6 thousand mortgage loans were granted in June – 3.3 percent less than in May. Although this is almost 1/3 more than in the same month of 2023, at the same time, compared to the best in this respect January 2024, when there was a peak in agreements signed under the “Safe 2 percent credit”, there were 41 percent fewer loan agreements.

So, apartments are not getting more expensive as fast as they were last year, but despite that, buyers are not interested in them. Those who argued that the real estate boom would end during the subsidy program were right. Anyone who wanted to buy an apartment has already done so. Today, developers are fighting for buyers’ attention. A storage unit included in the price, a promotion for a parking space in the underground garage, deferred payment for an apartment – this is how companies lure customers.

This is how the Polish Association of Developer Companies sees the market

According to Bartosz Guss, general director of the Polish Association of Developer Companies, quoted by RMF FM, “the near future will pass under the slogan of price stabilization.”

– Today, we have a lot of new apartments on offer on the market, and this causes development companies to compete for customers – he explained.

He added that this is proof of the important role that supply plays in the process of slowing down real estate prices. – It was enough to give developers time to rebuild the offer, and the pressure on the increase in apartment prices disappeared. What’s more, in some regions in Poland even small drops were recorded. That is why it is so important to launch further pro-supply initiatives, the introduction of which was announced by the Ministry of Development – he said.

– There is no doubt that the price levels achieved for apartments on the largest primary markets have already reached the ceiling. Given the difficulties with introducing the new “Kredyt na start” program, a price correction is inevitable. Its level will depend on the launched supply, which will not find takers. It is also important where the price drop will find a rebound level. With new projects that are strongly inhibiting, this may be a small change, while with a large number of unsold, ready apartments, the correction may be deeper – assessed Michał Kubicki, expert of the Real Estate Committee of the Polish Chamber of Commerce in an interview with “Bankier”.

The government is serving us uncertainty

The market would probably regulate itself in the coming quarters, if not for the uncertainty served up by politicians. It is still not certain whether the “Start-up Credit” announced by the government will come into effect. The group of critics in the government itself is huge. The following ministries have expressed reservations about the subsidy program: finance, family, funds, climate, justice, as well as the National Bank of Poland.

The Ministry of Family, Labor and Social Policy estimates that the “Kredyt na start” program, instead of improving housing availability, may lead to an even greater crisis on the market. The Ministry of Development and Technology remains adamant and convinces that the project is so well-developed that it will not increase property prices.

Ministry of Development insists on “Start-up Loan”

The “Start Credit” loan subsidy program has returned quite unexpectedly. In the last dozen or so weeks, one could get the impression that the government decided to withdraw, in English, from a proposal that real estate experts considered erroneous and leading to an increase in housing prices. Already in the spring, the then Minister of Development Krzysztof Hetman indicated that work was underway in the ministry on the continuation of the “Safe 2% Credit,” but silence fell over the project. Until, as it turns out, a while later.

The ministry wants the bill to be passed this year, and the program to come into force on January 15, 2025. But does it make sense to push it forward in a situation where the project has no support? Political issues aside, the uncertainty surrounding the program means that buyers and sellers do not know how to plan their actions. It can be assumed that some potential buyers who meet the program’s conditions (provided that we still do not know the final assumptions) are waiting for it to start in the hope of making a profit on the subsidies. Sellers are not putting up apartments because they hope that when the program starts, prices will go up. If it does start.

Subsidy programs do not help

We are not the first country to experiment with loan subsidy programs in the hope that this will make housing more affordable.

Loan subsidy programs lead to price increases, do not stimulate construction activity, and do not increase the percentage of families living in their own property – wrote “Puls Biznesu” a few weeks ago, citing the experience of countries that have decided to provide such support.

Subsidizing loans can take two forms: a subsidy to the down payment and a subsidy to the loan installment. In both cases, the economic effects are similar – they increase the demand for real estate – reports “PB”. It also cites examples from several countries where such solutions have been tested.

For example, the British “Help to Buy” program consisted of several components, one of which was the state’s auxiliary loans for the purchase of real estate. A household could obtain funding in the form of an interest-free loan, which reduced the requirements for the down payment and reduced the subsidies for the first years of loan repayment.

And what was the effect? ​​Prices in British cities rose, while construction activity did not change significantly. In contrast, on the border of England and Wales, where prices did not change significantly after the introduction of the program, construction activity increased.