There is no end to the rise in home prices. Supply is lagging behind demand

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The boom in the housing market is in full swing. There are still more people willing to live than the available premises. In addition to heated demand, rising prices are and may be influenced in the future by more expensive building materials, which make today’s developer price lists only temporary.

The reading of the urban.one real estate price index for the whole of Poland prepared for Bankier.pl and “Puls Biznesu” in June 2021 was 105.88 points. and was by 0.52 points. higher than in May. An even more significant increase was recorded in annual terms. It amounted to 2.01 points.

The growing reading of the index and housing prices are the aftermath of the boom that continues on the real estate market. As noted by Anna Karaś, Cenatorium Senior Real Estate Analyst, in Q2 2021 increases were recorded not only in the case of housing prices, but also their sale, which remained at a record level, as well as the number of apartments in which construction had begun.

According to the data of the Central Statistical Office, in the first half of 2021 developers have started the construction of 87.7 thousand sq m. apartmentswhich is a record result.

– However, this number is still insufficient to satisfy the persistently high demand – estimates Anna Karaś.

– The economic environment should not change in the coming months. At the same time, we note an improving situation in the domestic economy. In June, the unemployment rate fell by 0.2 pp and amounted to 5.9%. Employment increased by 0.3 pp, and the average salary in the enterprise sector increased by 2.9%. – comments the Cenatorium expert.

Apartment deposit

The housing market is still supported by low interest rates, relatively cheap loans and restaurant-related purchases, which are to protect the money invested in apartments against loss of value in the face of inflation, which in July reached the level of 5 percent, which we had not seen for a long time. per year.

However, apartments become more expensive much faster. According to Cenatorium data, in the seven largest Polish primary markets (Warsaw, Kraków, Łódź, Wrocław, Poznań, Gdańsk and Gdynia), the average offer prices increased by 1.4% compared to May. The increases are also reflected in the reading of the urban index, calculated for large cities. In June it was 112.23 points. and was by 0.79 points. higher than in May and by 4.84 points. higher compared to June 2020

The urban.one index for Warsaw in June 2021 was 115.7 points. and compared to May, it increased by 0.66 points, and in relation to June 2020 by 3.92 points.

According to Cenatorium data, rates on the secondary market have remained stable, although there is a visible tendency to increase the prices of flats launched for sale for the first time.

– People selling an old apartment, in order to finish new apartments, which they take over for use, must take into account the rising prices of finishing the new apartment and raise the rate – says Anna Karaś.

He adds that there are no major problems with finding a buyer. The average time of exposure of the offer in the case of apartments on the secondary market in June was 14 dayswhile the primary market is statistical the advertisement was on average for 18 days.

Either a rate hike or further price records

According to experts dealing with the real estate market, with the increases in rates appearing in the offers, those looking for their own “M” will also have to struggle in the autumn. Further increases in rates on the housing sale market have been predicted by over 70 percent. experts questioned by the Cenatorium.

– We will continue to observe a great interest in anti-inflationary investments in the housing market, which will cause interest in buying apartments and further price increases – says Tomasz Błeszyński, real estate market advisor.

In turn, in the opinion of Michał Kubicki, President of the Management Board of CMP Center Management Polska, price increases may continue until the end of the yearand only the interest rate hike by the Monetary Policy Council can set a dam on the rising stakes.

– It was difficult to expect such dramatic price increases. Today, in talks with developers, there is disbelief that prices will rise further than by the end of this year. The first signal to retreat will be an increase in interest rates. Despite the declaration of the head of the National Bank of Poland, it may take place later this year, in the wake of raising rates in Hungary, which record inflation as high as in Poland – predicts Michał Kubicki. – Limiting creditworthiness, changes in developer legislation and fierce competition in land acquisitions may discourage smaller developers from taking action – he continues.

Slightly different predictions for the coming months are presented by Marcin Krasoń, an expert on obido.pl. As he claims, the demand slump, if it is not over yet, is slowly coming to an end.

– You can already see a slowdown in demand for home loansand this is inextricably linked with the demand for housing. Supply has limited scope for growth, mainly due to the availability of plots or official formalities, so the only chance for a balance to recover is a fall in demand. It would be beneficial for everyone – emphasizes Marcin Krasoń. – The current situation for developers is also not entirely favorable, because it is difficult to run a business in unpredictable conditions. Healthy organic market growth would be much better – adds the obido.pl expert.

Rising construction costs are being adjusted by developers’ price lists

The current increase in housing prices is also influenced by more expensive building materials. We may also deal with material price increases in the coming months, due to the continuing demand for them.

As most analyzes show, the prices of wood and steel have increased the most in recent months, as we wrote about in the article “Building material prices are soaring. Wood, steel, polystyrene mercilessly up.”

Depending on the type of product, prices increased annually by several dozen percent, and in extreme cases even exceeded 100 percent. According to the report prepared by the PSB Group, in June 2021, on an annual basis, the highest – by 40 percent OSB board prices increasedwhich is the result of very high wood prices on world markets. The prices of materials from the “thermal insulation” group increased by 17.5 percent, roofs and gutters by 12.8 percent, and heating installations by 10.6 percent.

– Developers are still launching new investments, so the demand for materials is growing. I am afraid that if the waiting time for the ordered materials lengthens and their availability decreases, then This may affect the timeliness of certain development investments. On the other hand, developers can start saving by using cheaper substitutes, which in turn will not be a good solution for the quality and durability of the apartments being built, for which customers are paying more and more. Tomasz Błeszyński, real estate market advisor, says Tomasz Błeszyński.

As Anna Karaś from Cenatorium adds, conversations with developers show that today’s price lists are temporary and in the event of a further increase in prices, they will be adjusted, which means that prices will go up.

Rising prices of building materials, and thus also apartment finishing, also work to the advantage of the secondary market, where apartments ready to move in are offered, thus not burdened with the influence of rising prices of building materials.

Supply is lagging behind demand

Expensive building materials and the so-called labor generate one more problem – declining supply, which is not keeping up to meet the heated demand.

– Construction prices are so ridiculously highthat some developers decided to suspend new construction works until prices stabilize. We should add to this the lack of available land for development and inefficient architectural administration, as well as clogged with applications for entries from land and mortgage registers and we have a dramatic decrease in supply – analyzes Michał Kubicki.

Among the largest Polish housing sales markets, Gdynia is the worst in terms of supply replenishment, where the highest price increases are recorded – both for apartments introduced to the offer as well as in the already existing sales announcements.

– In Warsaw, in the second quarter of 2021, developers started the construction of a much larger number of apartments than in the previous quarters. Works started on the construction of 5.1 thousand. dwellings, which is a result comparable to the quarterly average for 2019. However, this number is still insufficient to meet the continuing high level of demand. In Q2 2021, developers in the capital sold approx. apartments. Certainly, this result would be even higher if the choice of flats on offer were wider, says Anna Karaś.

However, there are markets in Poland where the supply problem does not exist. This is e.g. in Katowice, Kielce and Poznań, where in the first half of 2021 developers started the construction of a larger number of apartments than in the entire 2020. According to Cenatorium data, in Poznań the result achieved in the first half of 2021 was also higher than in the whole of 2019.

However, there are cities where the problem with topping up the offer does not occur. For example, in Katowice, Kielce or Poznań, in the first half of 2021, developers started building a larger number of apartments than in the entire 2020. In Poznań, they also beat the result from 2019.

Own cottage included in the price

The growing demand is also visible on the market of single-family houses, which is reflected, among others, in in construction land prices. In June, the urban.one index for construction land was 141.52 points. and was 0.45 points. higher than in May and by 5.56 points. higher than in June last year.

During the first six months of 2021, Poles started building 54,274 houses, which was a result of 22.3 percent. higher than that achieved in the corresponding period of 2020. At the same time, individual investors received building permits for 60,386 single-family houses. In this case, the annual increase was 28.9%.

However, as Michał Kubicki notes, urban sprawl, although accelerating during the coronavirus pandemic, was also observed before spring 2020.

– This process is influenced by many factors. This includes increases in housing prices, their limited supply in city centers or problems with parking in housing estates. The pandemic only adds another brick. However, it is important that the development of technical, social and transport infrastructure keeps up with the spreading of buildings to the suburbs – assesses the president of the management board of CMP Center Management Polska.

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