The COVID-19 pandemic in the first quarter had no impact on the residential real estate market – the National Bank of Poland assessed in a recent report. Central bank experts point out that there was still high activity on the market and average prices were rising, both on the primary and secondary markets.
Experts of the National Bank of Poland point out that the restrictions applicable since March have also limited the activity on the housing market. However, they add, the consequences of the pandemic have not yet been reflected in specific data on the slow processes taking place in the market.
New premises have appeared on the long-term rental market
“In the first quarter of this year, high activity on the real estate market continued. The number of contracts for the construction of apartments sold in the largest primary markets was higher in the first quarter compared to previous periods, the costs of housing construction continued to increase as a consequence of high construction demand in the entire economy , as a result of which no decrease in home prices was observed on both the primary and secondary market, “it was written.
According to NBP data, average offer and transaction prices per square meter of flats continued to rise both on the primary and secondary markets.
Prices per sq m of comparable apartments in 6 cities increased by approx. 1.9% quarter to quarter and by 14.2 percent year on year, in 10 cities by 2.9% quarter to quarter and 13.3 percent year on year, and in Warsaw by 2.9 percent quarter to quarter and by 12.1 percent Every year.
“Bid prices were growing faster than transaction prices, which means that sellers expected faster price increases. The difference in average transaction and bid prices remained, which may indicate that buyers are not accepting too high bids,” the report said.
At the end of March this year in the largest cities, the internet offer of flats on the long-term rental markets began to grow – previously short-leased premises appeared on this market, which ceased to be profitable during a pandemic. This may be conducive to declines in rental rates in the future – NBP estimates.
Rental rates in long-term rents fell in Q1, and consequently rental profitability ratios decreased.
Investment in an apartment
In the NBP’s assessment, housing investment (not including transaction costs) was competitive in the first quarter against the background of interest rates on deposits and other available assets for households.
In the previous version of the report, it was assessed in turn that this investment was profitable in the short term (profitability calculated as the difference in interest rates).
The indicator of estimated availability of apartments in large cities (based on the average monthly salary in the enterprise sector) amounted to 0.80 sq m in the discussed quarter, i.e. it increased slightly compared to the previous quarter and was higher than the minimum recorded in 2007 Q3 by 0.32 sq m (i.e. by approx. 67%).
The estimated maximum available housing loan ratio increased slightly. The indicator of estimated credit availability of housing for an average household also increased slightly. Increasing salaries were the main factor behind slight increases in accessibility indicators.
Impact on commercial real estate
The NBP report in relation to the commercial real estate market does not yet cover the pandemic period. Despite this, the NBP pointed out that the coronavirus-related restrictions on business operations will have an impact on rents and property sales transactions, especially in the long run.
“It should be remembered that rents in commercial facilities are signed for a few years, and the termination of these contracts is associated with penalties. On the other hand, purchase and sale transactions are the result of long negotiations. A significant impact of a pandemic on structural changes in the sector can be expected, which can be observe only after some time “- it was written.
Source of main photo: Shutterstock