Residential real estate prices are struggling in Poland due to oversupply and increased interest rate hikes threaten to hamper demand. Even so, the second quarter experienced robust sales thanks to the lowered prices, which are as much as 28% below pre-2008 levels. The 14% sales increase appears to not be taking hold in Warsaw, however, as 44% of unsold homes in the second quarter could be found there, likely due to its relative price stability. While other regions are dealing with plummeting prices, homes in the capital have experienced the least lost value. For more on this continue reading the following article from Global Property Guide.
Poland’s property market stagnated in the first quarter of 2011, despite strong economic growth and robust investment into the country. In Q1 2011, property prices slightly rose in Warsaw and Tri-City but declined in the rest of the country.
Based on the latest figures released by REAS, in the year to end-Q1 2011:
- In Warsaw, the average price of ‘exposed’ units (i.e. already on the market, as opposed to newly-launched) rose slightly by 1.1% (-0.1% in real terms) to PLN 8,353 (€2,112) per sq. m.
- In Tri-City, house prices also rose by 2.5% (1.3% in real terms) to PLN 6,663 (€1,685) per sq. m.
- Other cities experienced house price drops ranging from 1.3% (-2.50% in real terms) in Wroclaw to 9.2% (-10.30% in real terms) in Poznan. Outside Warsaw, average apartment prices range from PLN 5,159 (€1,305) per sq. m. to PLN 6,906 (€1,746) per sq. m.
Compared to the peak levels seen before the global crisis (between H2 2007 and H1 2008):
- House prices in Warsaw were down by 8.8% (-9.4% in real terms)
- In Krakow, house prices were down by 8.8% (-10.8% in real terms)
- In Lodz, prices have fallen by 15%
- In Tri-City, house prices plunged by 21%
- In Wroclaw, house prices were down by 28%
- In Poznan, property prices plummeted by 29%
In Q1 2011, property sales rose by 14% from the same period last year. On a quarterly basis, sales increased by 4% in Q1 2011, its third consecutive quarterly increase.
Despite increasing sales, the oversupply of housing units is pulling prices down. In six major urban agglomerations, the number of unsold units rose by 4% y-o-y to 9,800 units in March 2011. Warsaw accounted for about 44% (4,300 units) of the unsold units over the said period.
To make things worse, the recent rate hikes are expected to weaken demand. Poland’s central bank, Norodowy Bank Polski, raised the key rate by 25 basis points to 4.5% in June 2011. The benchmark rate was hiked four times this year to curb inflationary pressures. In April 2011, the inflation was 4.5%, higher than the 2.5% target.
With the housing oversupply, combined with higher key rate and tighter lending conditions, house prices are expected to fall further during the remainder of the year.
Despite the global crisis, Poland’s economy grew by 1.8% in 2009 and by 3.8% in 2010. Then in the first quarter of 2011, annual real GDP growth rate was 4.4%. In 2011, real GDP growth rate is projected at 4%.
This article was republished with permission from Global Property Guide.